The actual state of ERL Forecast $7.6M free cash flow @ AUD$1500...

The actual state of ERL

Forecast $7.6M free cash flow @ AUD$1500 POG and a $2m rise in free cash flow for every $100 rise in POG

This was said prior to signing NRW at 9.5% Gold Royalty

So at $1500POG NRW will get approx. $2.8m in royalty so that brings free cash flow back to $4.8m

I think the main thing people are also forgetting is that ERL are only entitled to 60% of that cash as the other 40% will go to their partner Brimstone so ERL will only end up with $2.88m

If POG @$ 1600 according them it will add another $2m in free cashflow-9.5% to NRW and -40% to Brimstone will net ERL approx. another $1.1

If the costs blow out by 10% from their reported $22m to $24.2 NRW will still get their 9.5% royalty on gold produced and their "funding payment/bonus" is in no way tied to costs just revenue. Free cashflow with POG of $1500 is now $2.6m of which they are entitled to 60%

Same as if there is less grade

The management here have done a very lazy and poor job and sold out shareholders. Is this the best they could have come up with? The fact is they have put in a contractor holding all the cards that is in no way tied to costs. NRW can not lose on this job. They will receive a 9.5% royalty on gold sales irrespective of what the costs are. Given that ERL have not stated anything about mining costs its probably safe to assume NRW are not doing it any discounted rate.
How is ERL going to tell NRW what to do and try and contain "extra's" when NRW are fully funding everything??

The simple answer is -THEY WONT

What security did they give NRW? Highly unlikely NRW would agree to start unless they have full security over the lease given they would be aware of ERL's current financial position

Also what are the details of the deal with NRW?? Probably not likely to see a cent produced for at least 3 months after pre strip, getting enough ore on ROM for trucking contractor to start and then getting enough Ore on Toll Milling Rom for them to start processing a parcel. So 3-4 months is probably a fair estimate for cash to come. By then NRW would have racked up a fair old bill, does all cashflow go to them until they are square? Nrw wont want to carry until the end and let ERL control all the cash. If so it may be 6 odd months before ERL see a cent which brings the next and very real dilemma.

According to ERL's last quarterly they would have approx. $40kin the bank at the end of December. How will survive going forward? Another CR to dilute existing shareholders further?? Lend some money of NRW so they end up with nothing at the end of the project??

Either way they need cash NOW

In summary Management of ERL have placed the company in a very risky situation at the start of a mining campaign. They are also not being transparent with shareholders on deals negotiated and the figures they publish are always with the acknowledgement that they are only entitled to 60%. Its bordering on deception.

Remember the proposed underground extension they are talking about required significant capital to develop so if they get through the open pit side its seems unlikely to be with to many funds and then they are in the same boat again if the underground is mineable.

Management again is this really the best you could come up with??