The following is the only source of future income for HAV that...

The following is the only source of future income for HAV that I am aware of over the next 12 months assuming no further delays (source 12 July 2018 announcement “North Portia Divestment Completed”).

·        Second payment of $3.5 million upon Havilah’s completion of the required permitting allowing the mining of overburden at North Portia and the subsequent processing of the oxide gold component of the resource (expected in the last quarter of 2018).

·        Third payment of $3.5 million with Havilah’s completion of the permitting, which allows for the mining and processing of the supergene sulphide copper-cobalt-gold ore at North Portia (expected in the second half of 2019).

·        Final payment of $5.5 million, 12 months after the second payment (expected in the last quarter of 2019).

As at 31 October 2018, HAV had $321,000 of cash at bank. 

Our staff costs seem to be averaging around $800,000 per quarter and Admin and Corporate Costs were $1,330 for the year ended July 2018 and $164,000 for the quarter ended 31 October 2018 (source quarterly reports for July and October 2018).  Therefore, HAV’s cash burn before it spends a single dollar on exploration and development of our projects is approximately $1,000,000 per quarter.

The investec facility was announced on 26 October 2018.  It is a $6m facility which is payable within 12 months (date not clear on announcement, could be November 2019).  It is important to note that guarantees have been given over Kalkaroo and Mutooroo. Therefore, if not paid back in 12 months, we could lose these assets or a sale forced to repay the loan.  (My understanding from 26 October 2018 announcement).

If we think about HAV’s cash outflows over the next 12 months:

·        Approx $4M will be spent on staff costs, corporate and admin (being $1m per quarter).

·        Permitting costs associated with North Portia ($344K in annual report, might be higher with amendments).

·        ATO debt from R&D claim is $1,019,000 plus $255,000 in penalties and $111,000 in interest. Payment plan entered into with final payment in April 2020.  Therefore, assume approx. $500,000 of this is payable over next 12 months.  This is being disputes but legal fees will be incurred in doing so.

·        Interest will be incurred on Investec loan.

Therefore, I would estimate there is cash outflow of approx. $5m expected over the next 12 months BEFORE ANY EXPENDITURE ON EXPLORATION AND DEVELOPMENT.

North Portia Permitting Update announcement states that the payment of $3.5M that was expected by last quarter of 2018 is now expected by second quarter of 2019, being a six month delay.  In my opinion, it is therefore reasonable to assume that there is a very realistic probability that the next payment of $3.5M could also be delayed for six months and might not be received until 2020 instead of second half of 2019.

My thoughts are that HAV will be as risk of not being able to repay the Investec loan unless there is no delay to the $3.5M original expected by second half 2019.  We could always hope that there is a sale of another resource, we have been hoping for that for some time and “hope” is not a strategy to run a listed company.

If the $3.5M payment is received on time, then HAV will receive $7M before the Investec loan is due. However, this will only leave HAV with $2M to spend on Exploration and Development over the next 12 months.  Further, if they spend that $2M, then in 12 months time we will have no cash and no income.

Despite the above, Walter made the following statement in the North Portia Permitting Update announcement on 30 November 2018:

“This will delay the receipt of the second divestment payment of $3.5 million, but Havilah has access to adequate funds to allow the company to manage through this extended permitting process,”.

In my opinion, the above indicates to me that there are significant risks with Walter’s plan.  I’m not sure if he has highlighted this to the Board, but they should already be thinking about contingencies if the $3.5M due at the end of 2019 is delayed and how to fund something other than wages for the next 12 months.