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I wish the symbol was the only problem they have. The costs are high and the ore is getting deeper all the time. From an investor standpoint, 98% of the shares are owned by Brookfield. There is no volume and what volume trades is easy to manipulate. I think the speculation days are over.
Year end number are in: The results are nothing like the guidance given at year end 2015. Their production is well short and about a third of it was from surface "ore". The costs are still high and the company, therefore, needs millions from Brookfield. The ore is now deeper and the shaft isn't. The mining method matters less here than the distance to the ore dump. And that gets further and further away all the time. Look for costs to go up and underground production to go down.
As usual, you are looking at ancient history. That 6K talks about Q3. They processed a BIG stockpile in Q3 that is now gone. In September they laid off many workers, stopped mining the stockpile and downgraded their production forecast. Their AISC were in orbit with promises things will only get worse. I expect BAM is hoping for enough of a rebound that they can sell this thing to a company desperate to make a deal. I would not be surprised if they sell it for less than US$100 million just to unload it. I estimate that right now they are putting about C$4 to 5 million in each month to make up cash shortfalls.
Cha-ching: How do you know production is up? Even if it is, in Q3 their AISC was over US$1300/oz with an average Pd sale price of about US$620/oz. The average price in Q4 looks to be about US$600 with the current price at US$560 or so. Just using facts from financial statements (NOT the glowing press releases!) I estimate that at 6000 tpd of about 5 g/t material from UG, that they require about $4 million per month from BAM to make up the shortfall in cash flow for Q4.
How can you suggest charting a stock that has volume of less than 15000 shares per session?
Pro-life: What is the shameful nightmare? And on your Pd price post, it is up another $19 today and up over $100 in the last 2 weeks. I wonder what is behind this rise?
Cha-ching: your second link dated Sept 2 is NOT 2015 but 2011.
Hinch: Until there is a volume of over 100,000 shares per day, I don’t think the company is selling anything. No one else is particularly interested for that matter either.
Cha-ching: New management just announced. Quick, when the stock trades again should we buy more or sell?
Cha-ching: very smooth! Not sure what’s behind it, though. Nothing fundamental. Looks like the regulators want to know too. They have halted trading, at least in Canada.
Which post of yours should I have read?
As it happens they don’t deliberately flood the mine and I didn’t imply that. They mined out the crown pillar of the open pit, thereby creating a huge funnel to collect water and send it underground. To avoid flooding at the production headings at the bottom of the mine, they divert water to the explorations drift when the pumps can’t keep up. They have to make this decision every time there is heavy rainfall. The context of my earlier statement in the quote was the rain in Q1. They stated a production loss right after rain in that area, so I speculated that it was due to mine flooding, not an unreasonable assumption based on the information in this post above.
Ahh, where to begin. With reference to the first quote, note that I said US$1000, that would be about CDN$1300 now and about CDN$1220 when quoted. As it happens, NAP’s first and second quarter All In Sustaining Costs (AISC) was about US$1100 per ounce, including by product credits but NO interest (even though CDN$81 million was paid). I don’t see the price of Pd reaching US$1100 any time soon.
Where did you get the second quote? The company is Brookfield Asset Management (BAM), not Bridgestone which is a tire brand.
As far as raising capital goes, I think it will be BAM’s money alone. The AISC is just too high for anyone to be interested I think.
cha-ching: so how did you play this one?
cha-ching: Yes, very interesting.
cha-ching:
what say ye to the posting I am replying to now.
Swampyankee: I think you have summarized it well. There are those longs that will continue to hope. And why not? If you are not holding more than 100k shares, you don't have much more to loose and you hope against hope that someone really crazy buys this disaster before the end of the month.
Worth about half a cent a month from now after current shareholders own only 2% of the company.
cha-ching: where is the quote in your post 10638 from?
Cha-ching: They clearly need over US$1000 to have any chance of breaking even AFTER getting rid of all the debt and the Fx losses that go with it. Just the operations alone in Q1 had costs of almost US$1100 per oz. Taking into account by-product credits, they still need US$1000 to cover unexpected problems like they did in Q1. Q4 was their best quarter last year and their AISC were over US$1100/oz with NO problems and milling a stockpile where most of the mining costs were incurred in Q3. See my
Investors have to decide if they want to believe dreamy numbers from a PEA or guidance statement or the FACTS from the company’s quarterly financials. What has been the track record for the current management for accurate reporting and projections? How about their record in protecting the shareholders?
Q1 Results: Operations and money problems.
As usual the cash costs are suspect. Dollar figures in Cdn dollars except where noted otherwise. They report US$589/oz. In reality, they spent in total $98 million to make $64 million, including sustaining capital. Their operating costs alone were $51.4 million net depreciation. They lost $44 every tonne they processed! Multiply by the 786,300 tonnes milled and you can see why they needed the loan and fell short on the covenants. $98.3 million divided by the 45,626 oz produced gives a AISC per ounce of a whopping $2,154/oz (~US$1717 using Q1 avg. Fx of 1.2647) produced!! Even without the Fx losses, they still lose $15 per tonne milled and have AISC of US$1326 per oz. Somebody should double check this. It is the total of the operating costs (minus depreciation), plus expenses and sustaining capital ($5.6 million). I am not at all optimistic the Pd price is going to US$1700/oz any time soon.
They talk about lack of access to HG stopes in March. They would likely be the new stopes at the lowest level. There was considerable wet weather in the area of the mine in March. I wonder if they flooded the lowest level? That would make sense in that the stopes are now back in production. Was flooding the problem? Did they fill the exploration drift first? I am guessing there was flooding again this spring like 2012.
While current shareholders are likely holding worthless shares, BAM does not want to own this mine. We will then see the marketing savvy of the current management. Can they find a buyer? A little more smoke (exploration potential) and adding a couple of “mirrors” on the operating side and they will likely want to sell based on positive cash flow after coming out from under the burden of debt. While that doesn’t change the operational bottlenecks or the poor design of the underground system, new investors don’t generally look at those fundamentals. BAM may have to let it go for about US$100 to US$120 million. At that price there are likely buyers who really don’t understand the challenge – poor design, blocky ground and the fact that all the “exploration potential” is just a rehash of the dogs of years past. This mine has never really generated much cash but is still in operation 20 years plus later. There always seems to be new investors in the wings who don’t know any better or want to believe, you have to BELIEVE! And someone always has for the last 20+ years.
Does this clause from the 40-F cause anyone concern? It seems PAL may be in violation of some of its debt covenants. du Toit did say they were in discussions with them. The quote comes from page 10.
"The Company has not yet prepared its interim condensed consolidated financial statements for the quarter ended March 31, 2015. In advance of the end of the quarter ended March 31, 2015, the Company has become aware of potential violations of certain financial covenants under the Credit Facility and the Brookfield Debt which may occur as of the March 31, 2015 compliance date, subject to the finalization of the Company’s covenant calculations as at that date. The Company has obtained waivers providing temporary relief with respect to compliance with these covenants and anticipates obtaining amendments with respect to compliance with these covenants; however there is no assurance that such amendments will be obtained. The consequences of an event of default are described below in Risk Factors – The Company may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness; and – The Credit Facility, the 2012 Debentures, the Series 1 and Series 2 Debentures and the Brookfield Debt provide for events of default, some of which may be beyond the Company’s control. The Company’s ability to continue as a going concern is dependent on the Company’s ability to comply with the existing covenants or obtain the necessary waivers or amendments to the covenants, or if required, obtain necessary refinancing. In addition, the certainty of the Company’s ability to meet debt covenant requirements in the future is dependent upon several factors including, but not limited to, operational performance, market conditions and commodity prices.
If you're not in you are blessed.
Palladium seems to have taken a "left at the light" since then and is down to 733
Chaching: Thanks for the link. In my opinion the deeper ore underground is all they really have. This surface promotion has been going on for years and amounts to nothing. That said, refer to my post yesterday showing they are still bleeding cash just on their current operations, let along and pie in the sky plans.
Cost math to overcome
I thought it was time for some more boring math the company has to overcome.
I looked at the 2014 financial statements and calculated All in Sustaining costs including Operating costs (minus depreciation), expenses and the capex of last year. The bottom line is in Q4 where they “went for broke” and produced 60k oz they still lost $8 per tonne and for the year they lost $20 per tonne milled which explains the millions in borrowing they did. This cost structure has to change before any of the mining in Phase II makes any sense at all. Here is a table of the totals.
Q1 Q2 Q3 Q4 2014
Total 67,922 57,849 64,154 82,975 272,900
Pd Oz (000) 42.641 39.222 32.56 59.771 174.194
AISC/oz Pd 1593 1475 1970 1388 1567
US$ 1274 1180 1576 1111 1253
t milled (000) 516.511 521.478 575.664 1071.129 2684.782
Rev (000) 48,736 50,497 46,441 74,426 220,100
C$ Value/t 94.36 96.83 80.67 69.48 81.98
C$ cost/t 131.50 110.93 111.44 77.46 101.65
diff -37.15 -14.10 -30.77 -7.98 -19.67
doinit: PAL trades on the NYSE:MKT which is the successor to AMEX, the "new" AMEX so to speak with the same relaxed rules.
cha-ching
Quote:
The Company expects cash flows from operations to be sufficient to support the Company’s normal operating requirements, including capital expenditures and debt service payments, for the next 12 months.
I would like to see the assumptions behind this quote. It is easy to say, but for that to work they will need about US$940/oz in Pd price using the spreadsheet I made and inputting their guidance numbers. If a by-product metal price goes up, that helps as well. As with most "Forward looking statement" protected proclamations, there is no backup information behind this statement.
chaching: I was referring to the quotes at the bottom of your post 9717.
My information, ie. The 73% operating percentage comes from the income statement in the year end PR and the calculation is discussed in post 9716 that you replied to.
chaching: I am not sure where your quotes come from or what anything you have posted has to do with my pointing out that PAL burned through about $80 million last year. They cannot operate this mine with positive cash flow. In Q4 they were able to generate better results because they had stockpiled UG ore near the orepass in Q3 while they were making upgrades to the hoisting system. In Q4 they hoisted this ore, the mining cost of which was incurred in Q3. They were then able to run the mill at 12000 tpd, a rate they cannot sustain without using so much RGO that the costs skyrocket. They also can’t expand the tailings facility fast enough. In 2015, they will run at 8400 tpd according to the COO. We will see if they can generate positive cash flow then. I expect they will have to issue more shares, perhaps via more convertible debentures, or start capitalizing BAM interest again.
chaching: Good question. On the Income statement they show 198 million "spent" to make 220 million. BUT depreciation is not cash. Take that out and the number is NOT 90% but about 73%. Taking the depreciation out, you still have negative cash flow after paying all the other expenses - negative 11.5 million for 2014.
The real telling thing is they started the year with C$9.8 million and ended the year with C$4.1 million after issuing C$61.2 million in debentures and borrowing C$15.9 million on their credit line. They basically burned through about C$80 million after operating in 2014. They can't operate without raising more money in 2015. It is just a question of how they will do it.
chaching: On the cash flow statement: Refer to the Cautionary Statement on Forward Looking Information. They are spending more about 90% of revenues just producing the products. I don't expect this to change in 2015. Where will the $37 million for capex come from?
chaching: NONE of their LOM extensions matter if they can’t operate cash flow positive. Who will loan them more money for the infrastructure required when they are borrowing just to keep their operations going?? They would have enough trouble doing a share offering. But, based on the rah rah positive vibe I see on this and the Yahoo message board, a stock offering may work.
Don’t know for sure if the long cheerleaders are blind or just counting on the “Greater fool” trading theory being alive and well.
It seems to be working right now.
wee willie: What geranium says sounds contradictory but his premise on Jan 5th was that they would be profitable. Instead they have their Income from continuing operations in Q4 was negative C$11.3 million and their net change in cash is minus C$7.7 million. They borrowed another C$10 million from their Credit facility to keep themselves above water. This, I believe, is what geranium is concerned about in his/her latest post.
The only reason their Q4 cash costs look better is they loaded a lot of their UG mining costs up in Q3 when they stockpiled. They were able to put more through the mill in Q4 as a result but that, according to the 2015 guidance, won't be sustainable this year or any year because of the infrastructure design UG. They have managed to report an optimistic enough Q4 to perhaps boost the short term price up and therefore issue fewer shares when the inevitable need for more cash arises.
chaching: To maintain perspective when reading PAL press releases, technical reports or other weasel word loaded company documents, I recommend, as background music, Jive Talkin’ by the Bee Gees.
chaching: I don’t necessarily agree that increased production will increase profitability. The 7120 (or 7200) tpd number refers to mill throughput. They want 5000 tpd from UG but have found it challenging to get that. They top the UG tonnage drawn with RGO (regular grade ore) from a surface stockpile created when the mine first opened. It has a grade of about 1% Pd. Combine 4500 tpd at 4% from UG with 2700 tpd from the stockpile at 1% and you get about 197,000 oz per year assuming 80% recovery. If they try to go over that they will be running more 1% surface stockpile ore, increasing production but costs as well.
The COO himself in the Q3 conference call stated that 5000 tpd was not possible in 2015 in November. I don’t know for sure, but think that Q4’s results will meet 2014 guidance of 170,000 oz but there will be smoke and mirrors involved in how they got there. In Q4 I suspect they ran the mill at about 8000 tpd. They were able to do that because they had a stockpile collected in Q3 when they were making adjustments to the shaft ore handling system and trucked to surface and stockpiled UG. When the shaft started up again, they could quickly run the stockpiled ore to the orepass and sustain higher mill rates for a couple of months leading to the December press release. That, of course, is not sustainable so only the day rate on the shaft now matters. Hopefully they have some January numbers to share 10 days from now as well. With that we can calculate our own guidance for 2015 on production. Costs may still be a question mark.
The Caterpillar equipment is needed to truck the ore from the shaft to the mill. While most companies use a conveyor to move the ore to their mill, LDI elected to have a surface hopper at the shaft. They designed the system so that none of the trucks they owned fit under the hopper discharge, so now they need new ones. The saga of raging past incompetence continues. The current leadership has to work with what they have and make the most of it.
chaching: The report says the shaft capacity is 8000 tpd. Underground logistics limit the tonnage that can be hoisted, however. The ore has to be trucked 1.6 km from the 825 level and even further when they mine on 915 level. This limits the UG daily production to about 5000 tpd on a good day. The COO said in the Q3 conference call that he expects less than 5000 tpd in 2015. In my mind, based that limitation, they can’t produce more than about 190-200k ounces of Pd per year.
It will be interesting what projections they make for 2015. Positive cash flow is better than big production numbers in my book.
Chaching: this sounds like something from a consultant NP43-101 report, perhaps the one from March LAST year. Hopefully in10 days we’ll see how they are doing on those targets.
Hey JohnCM: forget POP they may full out EXPLODE!
Cha-ching: I don’t have any pain. I sold my shares when the COO sold his assuming he knew the pain that was coming. And it sure did as the price slid to new lows that we are still in now.
As for the gold mine sale to Maudore. They took payment in Maudore shares, worth about 70 cents Cdn at the time. The main asset, under the careful guidance of the CEO, who was the COO at PAL when it was sold, the Sleeping Giant mine is now on care and maintenance. The shares are now worth half a cent. Hopefully PAL unloaded them as soon as they got them.
As for things changing at the LDI mine. The current mine configuration will not allow for better production from UG then they get in Q4. The COO, Jim Gallagher, said as much on more than one occasion. That means no better than 4500 tpd from UG. Assuming a UG grade of 4 g/t and blending with 2500 tpd of 1 g/t from the surface stockpile for a daily mill run of 7000 tpd you get about 190k oz in 2015 using an 80% recovery in the mill. They could run more surface material to get the oz up, but the costs will then exceed the revenues quite quickly.