1) Current obligations that might be settled with cash from the bridge equity financing are:
* Tamerlane loan ($549,199)
* MRI, convertible debenture ($1,000,000) – I think this is an unsecured debt. It was the remaining $5M potential loan that was to be secured with Lamaque’s milling circuit and other assets, but MRI walked away last year before it was closed off. I haven’t seen anything that would suggest that the $1M debenture is anything other than unsecured. Currently, a case is in the courts with regards to the $1,000,000 payment. Century has filed a counterclaim for damages resulting from MRI’s default on the larger facility. I’m not positive that it is vital to make this payment in time close off our prepaid gold facility with the bank, due to it not likely being a secured obligation. It doesn’t pose a risk to the bank either as the worst case scenario is we end up paying back the $1M to MRI. However, the most likely scenario is an out of court settlement between MRI and Century at some point down the road for something less than $1M.
* Equipment loan/lease, current – ($357,213)
* Gerald Metals, hedge buyout ($400,784)
Sub-total = $2,307,196 (these 4 obligations add to this total), clearly the $5,250,000 bridge equity financing will be more than sufficient to retire all of these current obligations, if required.
2) Working capital gold facility – current ($2,225,177, non-issue, in my view), this is a revolving credit line. There should be no urgency to retire this amount. They should be able to continue making minimum payments on this balance without any issues. It is secured by 2,000 ounces of unfinished gold sitting in inventory at Lamaque. The current value of those ounces is C$2,200,000 which is sufficient security for that obligation. Century will have the option of paying down the full balance in order to stop paying interest. If they retire the entire balance then Century will still have the $2.2M revolving credit line available for future charges, plus the $2.2M value of the unfinished ounces in the Lamaque inventory. I see the Working capital gold facility as a net zero obligation for Century.
3) Equipment loan/lease – Long-Term Debt ($326,619, non-issue, in my view), there is no urgency to eliminate this item for payment purposes, but I suppose it could be retired due to being a secured item, depending on how clean the bank wants the balance sheet to look.
4) Net payables and accrued liabilities ($10,506,626) - stated as payables and accrued liabilities less receivables) – most of this will be paid down after the major equity and prepaid gold financings have been closed off. I think the rumoured $350,000 in arrears (Lamaque) employee compensation is included in this category. If the employee amount is truly around $350,000 (per the rumour) then there should be sufficient room in the bridge financing to allow for settlement at that point. I can’t comment any further though as I don’t know enough on the legalities to say which unsecured creditors are entitled to be paid first, and the understanding Century’s management has with everyone. It makes perfect sense to me that it would be the employees, but I don’t want to give anyone false hope as I don’t have enough knowledge to know for sure how it all works on the legal side.
5) IQ Debt ($16,156,952) – this debt will continue into the foreseeable future, even after the major financings have been closed off. IQ and the bank will likely share pledged securities. Currently, all mineral assets in Quebec are pledged as security for the IQ debt. That has always been my understanding and I believe it is still the case. The milling circuit was previously pledged for the Endeavour debt. However, the Endeavour debentures were converted over to shares and sold on the open market in 2006. As a result, the Lamaque milling circuit should currently be free from any security pledges. Also, there are currently no security liens again our San Juan properties and facilities. In addition, with PK’s convertible debenture now eliminated, there should be no liens against our NWT, Northbelt property (perhaps the Tamerlane loan is the only grey area, slightly). Our Northbelt property has about 200,000 (non-43101) ounces, with loads of potential.
6) Future income tax liability – LT Liability ($935,053, non-issue, in my view), per Peggy in the last conference call, Century is working with the IQ/Quebec government to stagger and defer these payments well into the future (to provide added flexibility for the Lamaque restart). The restart of Lamaque provides jobs for Quebec.
7) Asset retirement obligations – LT Liability ($3,899,085, non-issue, in my view), will be funded via significant cash flow when required down the road. Also, there are deposits for reclamation costs totaling $693,000 in the balance sheet. I suppose that could offset some of the obligations in the future.
6 comments:
If Century succeed to produce around the 50k O mark( 49,3k ), let's say 45k the first 12 months of mining, what cash cost can we excpect do you people think? If we are set to believe the reports they have given us, with my calculation( just in a haste ) we are set for ~$650 per ounce produced. If we expect a total cashcost around $700?( if eveything runs relatively smoothly ), and a average $900 selling price next year, we will get: 200*45 000= $9 000 000( net-cash, because of our already very good tax benefits ). I also hope SJ will produce atleast 20k next year, so this should guarantee to pay for our 10k ounces deal per year. This is ok for me, but what i really hope for is that Century could prove up a little higher grade, just to reduce the risks and to earn a little bit extra if possible. From what i have read, Century expects that the recovery grade will be about 4,5 g/ per tonne the first year, and maybe to change these already scheduled ounces will cost us more, than it will do to( if possible ) prove up and mine higher grade ounces in the first year? So, i see 2 possibilities that would encourage me even further with Century,
number 1: as i already said, mine higher grade ounces first year, to get a solid start.
number 2: even more important, that is to give out an NR about scheduled production, which is greater than the current numbers, because with 5-6M ounces in total resource and over 40% of those ounces in M+I category, i personally feel a little disappointed in reaching 100k O in 2013! Maybe it's legitimate because of certain things, but i really believe( but i don't know ), that Century eventually will set a higher standard for the coming years. / Juha
Some positives for the third quarter financials: as i see it we have had an total income of maybe around $3 700 000. This is it: 0,6M from Peggy( 400k income and 200k debt relief), the Poderosa settlement i also value to about 0,6M( 300k cash+the shares we got ). The third quarter PP gave us a net of about 1M+that i expect that SJ gave us about 1,5M( 500k per month after 20% taxes ). 0,6+0,6+1+1,5= $3 700 000
So maybe they have cut the capital deficit all the way down to about $10M, you know, to do that they still should have had about 800-900k or so per month to drill, pay salaries, administration around financing deals etc. And as always, please correct me if i'm wrong. Also, this is for the third Quarter. This quarter might be just as good especially if they close the ( in my view great .20pp recently published )+the high gold prices which will, if SJ remain in good shape give us even some extra dollars. Besides all this i have looked up Module Resources a little closer( which Production05 wrote about ), and i really see it as a win-win deal. It could bring us several millions down the road, and it has already given us 150k this quarter. If they want to aquire Caroline Mine( 90% ) from us and we don't use any buyback options, it certainly will, the deal is already on paper. So bottomline is, even if we don't close the proposed $45M deal we are still in much better shape than just a little while ago.
/ Juha
Here are my notes on planned Lamaque stats from the last conference call:
first 12 months:
* avg t/d = 808
* production ounces = 49,300
second 12 months:
* avg t/d = 996
* production ounces = 53,100
third 12 months:
* avg t/d = 1,200
* production ounces = 74,300
fourth 12 months:
* avg t/d = 2,000
* production ounces = 100,000
here are the grades I get when I run those planned numbers (using 96% recovery):
* first 12 mths = 5.49 g/t
* second 12 mths = 4.80 g/t
* third 12 mths = 5.57 g/t
* forth 12 mths = 4.50 g/t
The grades likely depend on which pockets they are mining at the time, as they all seem to vary.
I am also disappointed that they can't get to 100,000 ounces a lot quicker. I guess they have to do the work first to access all the extra ore. I am hopeful that there will be more flexibility to speed up the work once Finskiy and Scola are on board, especially with the extra capital options they provide. For example, we might be able to convert the $.30 warrants relatively quickly, to provide an extra $15M. Will an extra $15M injection help us to access more ore (quicker)? That remains to be seen, but it will be nice to have that option.
I am also disappointed that they haven't shown a ramp up to 150,000 ounces in the plans as yet. They would probably have to dewater the mine first of course, but that is what they should be aiming for on a longer term basis.
They still have the milling capacity, even with the flip over to high grade milling. This is from the latest Lamaque tech rpt (pg 121):
"One ball mill will be temporarily taken out of the circuit while the mill operates at 2,000 t/d or less and then be reconnected when the mine can start delivering 3,000 t/d to the mill."
I read somewhere else in the tech report that the mill capacity is around 3,600 t/d. With 3,600 t/d, 4.5 g/t and 96% recovery, I get an annual production capacity of 180,000 ounces.
I would like to see them find more mill feed over the next 3 years to deliver much more production and take better advantage of the strong gold prices (without sacrificing aggressive work at the Lamaque u/g and San Juan of course). Here are some thoughts:
1) West Plug o/p (short trucking distance) - I like the idea of mining and overlaying the West Plug o/p ounces into production in the first 3 years, while we wait for the u/g ramp up. The West Plug might cost at least $7M to establish though. Maybe we can use some of the warrant money to get it started.
2) Aummaque u/g (short trucking distance) - it houses about 50,000 to 100,000 established non-43101 ounces. It has a shaft and various levels already established, but a lot more work is required to get it mining ready.
3) Nearby deposit acquisition - it would need to be a clean deposit with gold only (no base metals mixed in) - our processing operation works better when it is kept pure.
Another factor on production ounces is the gold price. As mention in a previous post, Century currently uses US$800 while a number of other companies have recently switched over to US$1,000. Century can switch over to US$900 and still remain conservative. That would represent a 12.5% increase in gold price. Let's assume that it gives Century the opportunity to mine 12.5% more ounces. The production profile could now look something like this for Lamaque:
first 12 months:
* US$800 gold price = 49,300 ounces
* US$900 = 55,500 (6,200 increase)
second 12 months:
* US$800 = 53,100
* US$900 = 59,800 (6,700 increase)
third 12 months:
* US$800 = 74,300
* US$900 = 83,600 (9,300 increase)
fourth 12 months:
* US$800 = 100,000
* US$900 = 112,500 (12,500 increase)
With the injection of capital and a higher gold price, this is what I would like to see for San Juan:
first 12 months:
* US$800 gold price = 18,000 ounces
* US$900 = 20,250 (2,250 increase)
second 12 months:
* US$800 = 24,000
* US$900 = 27,000 (3,000 increase)
third 12 months:
* US$800 = 30,000
* US$900 = 33,750 (3,750 increase)
fourth 12 months:
* US$800 = 32,000
* US$900 = 36,000 (4,000 increase)
This is what it would roll up to company wide (Lamaque + San Juan:
first 12 months:
* US$800 gold price = 67,300 ounces
* US$900 = 75,800 (8,500 increase)
second 12 months:
* US$800 = 77,100
* US$900 = 86,800 (7,700 increase)
third 12 months:
* US$800 = 104,300
* US$900 = 117,400 (13,100 increase)
fourth 12 months:
* US$800 = 132,000
* US$900 = 148,500 (16,500 increase)
"* first 12 mths = 5.49 g/t
* second 12 mths = 4.80 g/t
* third 12 mths = 5.57 g/t
* forth 12 mths = 4.50 g/t"
Nice grades! I didn't thought they would get up that good grades so soon, year 3 looks especially promising if we get there. You know, my imideate thought was that they would mine those 1,6 Mt( 4,78 g/t ) for the first 3 years, exactly as it is said in the report from Januari this year. This is a much better start, and hopefully we will reduce our CC substantially with these grades, year 1 and 3. Maybe the most important years too. Yes, they should able to mine 150k+ per year or more eventually, but preferably in +-5 years time, not 10 or 15. So really, these grades( and following CC, despite lower tonnage milled ) makes more sense to me, and i understand Century a little bit better now. Really, those grades came as a pleasent suprise for me. Oh, year three we could make a lot of money i see it right away. For gods sake, we could make $30-40M already in -12 if the gold holds the current level and they manage the mining part accordingly. / Juha
My last post under this subject( if anybody have questions or critique i ofcourse answer ), i just want to lay out some figures based on production05 for me, new information.
Cashcosts,
Year 1(2010): CC $566 -based on $100 per tonne
year 2: CC $583 -based on $90 per tonne
year 3: CC $447 -based on $80 per tonne
year 4: CC $415 -based on $60 per tonne
Earnings( net-earnings, most of it. Atleast $80M we got before paying taxes. ),
Year 1: $16 470 000
Year 2: $16 830 000
year 3: $33 650 000
year 4: $48 500 000
( it's based on a $900 gold selling price )
Some notes:
*I haven't used Total cash costs
*And ofcourse other costs for the company are not accounted for either.
*But, these grades and tonnage( especially tonnage ofcourse ) is for now, maybe they could do it even better, let's see..
*The weakest year as i see it, just looking at these figures alone, is year 2( 2011 ).
*For 1 ounce i have used 31,1g p/t
/ Juha
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