HGO Position, page-25

Hi C69

You might find the Experts Valuation that was disclosed with the notice of the extraordinary meeting in Oct 17 very educational if you haven't already seen it..

Since then the copper price has jumped about $720au a tonne but management have apparently been taken a bit by surprise by the fact that mining is getting more difficult as the hole gets smaller.

The Expert valuation had us completing mining this year with for a cost of $58m. we would have already spent that much and mining is forecast to continue until the middle of 2019. Lets hope that as the hole gets smaller the monthly spend gets smaller with it. 

Now to answer your question about debt levels.

The experts valuation indicated that the company had creditors of I think $37.5 m and debt of $4.5m.

Some of the 37.5 would be on normal terms and if we presume that is 45 days there was probably circa $30m of overdue credit and debt.

We repaid $12.4 m in the first half and another $12.5 in the third quarter.

With good prospects for a strong performance in the fourth quarter and a good hedge book it looks like we could clean the balance up quickly and start building cash hopefully for a fully franked dividend.

You may not realise that HGO has carried forward tax losses to cover most if not all the cash that will emerge from the open pit so there will be little or no tax drain. $7m of tax to pay if we are lucky enough to win what the valuer came up with.

Also you need to be aware that HGO has more than $20m in franking credits.

If they have the cash which they may well do, they will be in a position to pay fully franked dividends of 8.2 cents franked up to 11.7 cents.

Those of us with holdings in tax free super funds probably won't be voting for Bill Shorten.