Member Info for M20ASH

Hi RD2U, I have no problem with you posting further on the subject of the change of auditors. All I can say is that I have no more insight into the matter than I have already alluded to. Suffice to say, I have no problem with the Company’s decision.
Cheers, Ash

Evening, perhaps I can add some clarification to the increase in depreciation and amortisation charges. The adoption of the FRS16 accounting standard for 2019 means that instead of reporting operating lease costs, there is a requirement to treat the assets leased as right of use assets and effectively capitalise them with resultant amortisation & depreciation charges. This has the effect of moving cost from production costs for leased assets used in production e.g. plant & vehicles to depreciation and amortisation costs. Effectively, it reduces cost of sales and increases EBITDA with a higher level of amortisation and depreciation than in the previous year, as there is no requirement to restate the prior year numbers.
It also impacts the cash flow statement - if you look at note 26 in the Financial Report, you will see the amortisation of right of use assets added back to profit to derive net cash inflow and the actual lease payments are taken back out as use of cash.
All supposed to make it easier for the reader to understand the accounts and compare one set of accounts with another. Lol!
Just smoke and mirrors devised by Accountants with nothing better to do and nothing the Company can do about it.
Hope that helps? Probably not! Any other questions?
Cheers, Ash

Hawkspear, please save it for the GGP board. This cross-board contamination is getting a bit wearing today. I am invested in HUM and enjoy reading the comments without contributing too much, but like many others here, have no interest in GGP or your opinion.
Thanks, Ash

Hi RD2U, if you search for AAU on here, but select the AAU.GB.PL option below the normal AAU option you will see 3 trades, including the big one, going through on NEX.
With regards to filing, there is obviously the COVID-19 extension available. Not always easy to get things done as normal, especially with travel restrictions and people out on furlough as I’ve discovered this year. Audit close out meeting on Friday - just over 6 months since period end.
Cheers, Ash

Hi RD2U, I think the accounting rules are applied correctly, but as you say, the information in the RNS may be a little misleading for the reader, if they were to take revenue per gold ounce and cash costs per ounce as being the determinants of operating profit/EBITDA or whichever measure you're trying to calculate when they both include the silver credit.
With regard to the filing issue, you can view the Ariana Exploration & Development 2018 accounts online at Companies House and you will see the restatement of the 2017 numbers and correction of the 2018 numbers to reflect Galata Madencilik as an investment rather than a subsidiary of Ariana Exploration & Development. This I understand was raised very late on in the audit/filing process requiring a great deal of extra work at that stage and ultimately resulted in the filing delay. As I said, the matter was in hand, but may have caused some upset. I know if the same thing happened to me I would be totally p****d off!
Cheers, Ash

Hi Paul, glad it's not just me that has been confused by this! Worth highlighting, I guess, so anyone doing a 'back of a fag packet' calculation of profit does not simple take the revenue per gold ounce less the cash cost. They may be disappointed with the final results.
Cheers, Ash

Hi CK, it won't be anything to do with loan repayments as the capital repayment element is a balance sheet item and the interest or 'profit' element is excluded from cash costs and reported as finance costs in the accounts.
What I am getting at here is on the one hand you have revenue, which includes both gold and silver sales and on the other, you have cash costs, which, by definition, also includes a credit for silver as a by-product. You would be double counting the value of silver sales by taking total revenue per ounce less cash costs. The true cash cost surely has to have the silver credit added back before you can compare it with total revenue to estimate the likely profit? Or when comparing costs with other producers without additional silver or who calculate the cash cost differently?
Cheers, Ash

Morning all, had a thought about how cash costs are calculated by AAU. In the last RNS it states 'operating cash costs are inclusive of on-site costs and off-site charges and royalties specific to the project. It also includes adjustments for stockpile balances at the end of each quarter, in addition to an adjustment for by-product silver.'
Does this mean that when comparing revenue with cash cost, you have to ignore the silver credit included in the revenue per gold ounce and just use the realised gold price? Alternatively, perhaps another way of doing this would be to calculate the difference between the revenue per gold ounce and the realised gold price and add this back on to the cash cost figure. That would then probably give a better comparison with other gold only producers.
I am aware that they often refer the cash cost calculation back to the original scoping study calculation, but I've never seen that.
Any thoughts would be appreciated as I have never quite understood how the cash cost reconciles to the final cost of sale numbers in the accounts, which is always significantly higher, and this may be the reason.
Cheers, Ash

Hi RD2U, the Plc accounts were signed off and filed on time, but the accounts of the immediate subsidiary Ariana Exploration & Development were not filed on time. Hence the potential problem.
Cheers, Ash

Hi RD2U, my understanding of the reasoning behind the change of auditor was more to do with issues created rather than KPMG's ablity to' charge' like the proverbial rhino. I don't think too many were aware at the time of the delay in filing the Ariana Exploration & Development accounts with letters issued by Companies House once the filing deadline had passed, which incidentally was the second year in a row.
This is the subsidiary of Ariana Resources Plc, which in turn owns the asset holding subsidiaries, which, in a worse case scenario, may have reverted to the Crown had the company been struck off for failing to file accounts. Without going into further details, the matter was in hand, but the issues created possibly influenced the decision to change auditors.
With regard to the stock and production spreadsheet, it is merely a guide that can be updated and used to gauge future output based on grades and capacity with the knock on effect on costs.
By the way, thanks for the further insight on the forward contracts.
Cheers, Ash

A quick question. Does anyone understand how this is impacting or may impact the gold price at the moment. I haven't got time to get my head around these things!
Thanks, Ash

Hi John, I believe it would be accrued in the accounts, but the actual 'cash' settlement is on or before 30 June each year and is, therefore, included in cash costs for Q2. I noted that Dr S repeated the $600 average life of mine cash cost in the Proactive interview yesterday. Given that 2018 costs were $415 per oz and 2019 is likely to be around $500, it is not unreasonable to expect 2020 costs to be moving towards or even over $600 later in the year, especially when you consider the jump last year from $399 in Q1 to $589 in Q2. If that differential repeats, then Q2 is likely to be closer to $700.
Cheers, Ash

Normally, I would say yes, but because the new auditors are also reporting the prior year comparatives as well as the 2019 results, they need to be satisfied with the KPMG numbers, which involves a bit more work than usual. Hopefully, this has all been built in to their audit timetable to allow the results to be reported at the same time as last year. Sooner would be even better.
Cheers, Ash

Hi CK, I always assumed that the inter-company loans from AAU and Proccea would be equal in size as it is a JV and that these needed to be repaid before dividends could be paid from Zenit. Now this has now happened, it might be reasonable to assume that those loans have also been settled leaving just the working capital loan to be repaid.
All fairly positive this morning. Cash costs were up, but below my worst case scenario, which perhaps allowed for too much inflation. Below Q3 2019, which probably reflects the fall in the TL over the period, but above Q4, which reflects the lower output.
As last year, we can expect a bigger then normal jump in cash costs in Q2 because the Turkish Govt State Right for the 12 months will need to be settled by 30 June, but costs should return to trend for the remainder of the year.
Cheers, Ash

Does anyone think we’re in the middle of a James Bond film, where a megalomaniac Bond villain develops a deadly virus, strategically releases it around the world to maximise the spread and incite maximum conflict between the major powers resulting in economic chaos at which point he issues his ransom promising a vaccine, whilst the Americans, Chinese and Russians are all blaming each other and, instead of sending in James Bond, the Brits send in Johnny English to sort it out?
Or do you think I’ve had too many beers?
Cheers, Ash

Hi Joe, not so quiet now though! Couldn't really get motivated to work today and far too windy here to sit out in the sunshine so I thought I'd spend some time on AAU and update my numbers - seems to have sparked some good debate.
I'm probably as surprised as you are that the sp has climbed quite so much - maybe investors taking a position in anticipation of the quarterly update and 2019 final results rather than any leak re the new JV. I believe that PG are increasingly bullish and there has been considerable coverage by one of the well-known share tipsters over here - some new contributors here, perhaps reinforcing that view. Not complaining though - the more the merrier.
Cheers, Ash

Hi RD2U, wow! That took a bit of reading. Probably sensible to take some profit at this stage. As you say, the sp has jumped over the top bollinger and is just below the 14 day RSI at 70%. Barchart.com opinion also has it as a 100% buy. Question is, do you think it's about to break out or will more take some profit or look to trade a possible dip - it may well depend on the quarterly update and the cash costs - if they are on the rise, it may give pause for thought.
I also think it's worth taking a look at my analysis of production and stock levels - until now the JV has been able to supplement production grades by mixing in higher grade ore from the stockpile, but they are now starting to equalise, which means the lower grades being mined will become the norm. With the limit on milling capacity, it seems realistic to expect gold produced to drop below 4,500 oz per quarter in line with annual guidance. Combined with an increase in milling costs per oz produced, how will this affect profit even with a higher gold price?
Just something to consider.....
Cheers, Ash

Hi Paul, that's fair comment and as I said I only use 10 as a personal guide because it's simple and I can't be bothered with NAV calculations - I was never very good at it anyway! If a gold miner is producing and generating cash surpluses from profit and the market value is considerably less than 10 times the likely profit, it strikes me as worth investing and exploiting that value gap. Yes, there are risks, but aren't there always....
Cheers, Ash

Hi Dubbs, no idea is the easy answer. When you look around and see the range, it makes very little sense - HGM 7.3 currently, AAZ 10.45, SRB 16.6 and CEY 30.6. Some are single mine, some are multiple, some pay dividends. I've always based my projections on 10, but it's purely a guide for me and given some of the valuations of non-producers, it can be more about anticipation, whereas reality is a little too boring for a lot of AIM investors.
Cheers, Ash

Here's a new link - this time to a version you can download or edit and it should have the formulae used. My original is saved separately.
https://1drv.ms/x/s!Art3fOvTbZE8tDbtdrcVUgc4OJw1?e=nTpcRe
I take our point on the ball mill - may not be worth it, if they have to increase the cyanide in leach capacity. My thinking was that they could add a second ball mill at Kiziltepe, increasing capacity to utilise full current production without diminishing the stock pile plus satellite resource before dismantling and re-deploying at Tavsan in due course. My concern is what are the timescales for approval, including any EIA requirements, for increased capacity.
With regard to the cash cost calculation, I understand. I was just thinking that the ore going into the stockpile would only have incurred, say, 50% of the cost and the processed ore would have incurred the full cost so if I work out the component elements from a previous quarter based on tonnage moved and tonnage processed, I can then apply a formula to calculate the total cost and subtract the cost per oz added to the stockpile based on the movement cost only.
As I said, by the time I have worked this out, we'll probably have the results so I may as well wait!
Cheers, Ash