Welcome To The Golden Band Resources HUB On AGORACOM
Saskatchewan's SECRET Gold Mining Development.
Message: Charts & Comments
"18. Commitments
Gold supply
In May 2012, the Company entered into a supply agreement whereby the Company committed to sell 100,000 ounces of its gold production to Waterton(Sprott) until the later of May 9, 2015 and the date the commitment is fulfilled. The gold is sold at the lesser of the previous day’s London market PM gold price and the average gold price for the previous thirty days, with a seven day valuation period."
- The gold supply agreement is in vigour until May 9. Everything follows from this.
- How does a company go about hiding the fact that they escrow production, and that the sum could be in the range of ~$150m without it showing up on the balance sheet? That's simple, you take the dore bars and store them in a trust account. They only become a recognizeable asset once they are processed.
- The balance sheet is set up so that you will mistake liabilities for loans made to the company. This is entirely fallacious. Loans and costs are always prepaid. This is how the company works.
- However, because there is an outstanding commitment, all related costs towards the fulfilment of this contractual obligation are considered accounts payable until the commitment is realized, even though the costs have been prepaid.
- I had assumed that cash costs were $674/oz. considering the first two quarters of commercial production. But the actual cash costs are probably much lower.
- Accounts payable are ~$43m. That means if they have 100k oz. in the escrow account, then costs are only ~$430/oz. Cash costs may be correct in the financial statements, but it is preposterously absurd to suggest that they are in the rage of $4500/oz., since the small number of ounces declared as production carry the entire financial weight of losses for the quarter, rather than the actual produced quantity of ounces sitting in escrow, which is the bulk of production and did not produce cash flow due to the gold supply commitment.
- They would have escrowed approx. 30,000oz. or more every year for three years, and paid costs out of escrow holdings and called it production.
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