I need to analyze some more, but these results were better than expected. I was expecting -$.12 EPS and RNC actually reported -.05 EPS.
Most of the difference came from "Amortization & Depletion" line item. I was projecting $1.4M and this came in at $.6M. From discussion with the company, RNC added PP reserves which extended the mine life at La Libertad per 5/20 Press Release. Thus, you essentially have the same mine cost spread out now over more years with related adjustments which caused this decrease to $.6M. For future quarters, this Amortization & Depletion line item should be $1M per quarter.
RNC hedge loss was also better than I expected. Hedge accounting is very difficult to figure out, even for me... The good news is RNC will have no hedges by 1Q 2005 so I will never have to figure out why such a large discrepancy. RNC hedge book is now 34.5M ounces @ 9/30/04 against La Libertad production only. La Libertad should produce about 17K ounces in 4Q04 and has a maximum run rate of 20K ounces, I would guess 1Q05 should be at least 18K ounces so all hedges will be gone by 1Q05.
For 2005 on Nicaragua operations alone, I am projecting EPS of US$.29 now and US$.42 of cash flow per share. Increased RNC cash costs $10/oz from their mine plan based upon higher energy costs, etc. and using $425 POG and 111K ounces. This is all preliminary, I need to scrub and review these numbers a bit more... And remember, RNC has missed their last 2 quarters ounce production targets, and rather badly so it is no sure thing they will start meeting their production targets now. However, I believe RNC is sandbagging and will be near meeting their full production potential in 2005.
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