Ann: December 2018 Quarterly Activities Report, page-54

 Hi Gself,

I think I read somewhere that NST at Dec18 had $230m in cash in hand at Dec18.  Regardless their cash and cash equivalents as declared at Dec18 are $292m.  Over the past 4 years their average free cash flows have been over $140m/year.  Ok FY2018 was under that at $105M - due to the expansionary capital spent (eg exploration and equipment).

As per the NST Dec18 report, Pogo is at worst break-even - so there is no effect on the above cash flows or cash position - except that the $105m cashflow is likely to be maintained per year (all other things being equal) - so hypothetically they will build on their cash in hand by the end of the year.  Because they are paying dividends (of just under $60m last year) the actual net cash flow reduces to $40m for the year - which adds to the C&CE position - to $340m.

However, one interesting statistic for you from Dec18, which if you know anything about UG mining you'll know is a great step in the right direction, at Pogo over the last quarter their decline development rate has gone up from 195m/Month to 262m/Month.  That means they are getting closer to accessing the deeper sections of the orebody faster.  The total development increases per month averaged 150m.  By simple logic that is likely to continue increasing so the Mar18 quarter will have even higher development rates.  Also they are looking at expanding the mill capacity by over 30% which when running at such capacity will significantly cut their processing unit costs.  Once the development is far enough ahead then the production rates (through longhole stoping) can be maximised.  Unfortunately I can't say when that will be without seeing the mine design.

I think earlier in the year they said they were spending $100m on exploration this year. They already have significant reserves - so can turn off a lot of that spending very quickly.  Also they can stop paying the dividend.  That's up to $160m of additional net cash flow that can go to the business.  The reason they are spending that money though is for the shareholders benefit - to increase the life and asset values of the mines to hence increase the company valuation and in turn share price, and return some of the profits to the shareholders (dividends).

Still, in the short-term Pogo is going to take time to optimise.  Personally I'd be happy if they got the FY19 AISC of Pogo to $1500/oz.  That's at least $200 margin per ounce which for 250,000oz equates to $50m additional FCF if my accounting knowledge is right.

imho

GFO