Goygoy, I am not way off at all my friend.
First, thanks for your comment, however I completely stand by what I said. You are absolutely wrong, and let me explain to you why.
Depreciation and amortization are NOT included in the AISC that BAA calculates (which it does on a sales basis rather than production BTW, complicating things a little bit when bullion inventories from a previous quarter are sold, or on the contrary when gold produced that quarter is not sold and added to inventories, but that's a minor point).
Anyway, back to your claims that depletion (which I agree is obviously a write-down of book value that doesn't correspond to an actual cash expense), is part of the AISC and must be subtracted to derive a true cash cost. That is not true at all. Please refer to page 26 of 27 of the second part of the last quarterly report (Q2 2015) as an example to easily verify this.
You will see there the following numbers under AISC:
- Mine operating expenses 28,068
- Deletion and depreciation (7125)
- Total cash costs 20,943
- Sustaining capital 4,074
- All-in cash costs 25,017
The AISC on a sales basis (35,665 oz sold) is thus 701/oz (as in 25,017,000 / 35,665).
So you easily see for yourself that depletion and depreciation, while subtracted from operational revenue for the purpose of calculating earnings (EPS) and don't translate to an actual cash expense, are absolutely not included in the cash costs, nor the AISC, which is only cash costs + sustaining capital expenditures. The sustaining capex here was about 4M, and corresponds more or less exactly to the "acquisition of property, plant, and equipment" that is a true cash expense recognized for the quarter under investment activities on the consolitated statement of cash flows.
So, the company had an AISC of 701 in Q2, and since it sold some inventory from Q1 on top of Q2 production, on a production basis, AISC would have been actually higher (around 720/oz). That is with a production at capacity of 34,000+ oz. When production falls back to the expected average of 30,000/quarter, AISC is likely to actually EXCEED 750/oz and be closer to 800. Obviously that depends on the sustaining capex, which can be lower some quarters, but can't be controlled that easily. When something breaks, you do have to replace it whether you like it or not. If the AISC had included the depletion and depreciation as you claim, that number would be 32,142,000 / 35,665 = 901/oz, much higher than the actual 701 reported.
Regarding exploration expenses, I did say myself in the post that this can be reduced if need be, but even then, the company will not make any cash and be at best neutral on its cash position. Also, I have been generous on only counting 10M of admin expenses (that quarter alone they were at 3.66M as you can see, and also higher than 10M last year), so the reality is likely to be worse than what I have painted if gold prices stay flat.
So, the bottom line is my assumptions are absolutely correct and reasonable, and certainly not flawed by having omitted to subtract depletion and depreciation or other non-sense.
I find it disgracious when people resort to their credentials to give more weight to their opinion as if they couldn't be wrong because they are X or Y. Well, you may be the president of the Congo for all I care, that doesn't make you less wrong. Since we are name calling, I hold advanced degrees from two universities in Cambridge. One starts with an M and ends with a T, the other starts with an H and ends with a D. This reminds me of what Noam Chomsky once said at a seminar I attended: "what matters is not people's credentials or who they are, it's what they say".
And yes, while I may not work in finance, I can read a statement, and do a simple addition and subtraction (or more advanced mathematical computations for that matter...)
Cheers
News 
Market Data 
Discover 
