cash burn, page-5

I have only recently started to look at this company and from a quick glance at its resources and having commenced production, I like what I see.

However, it is the rate at which they may consume their cash is the concern given it seems to be a difficult market to raise funds or sell assets.

As at 31 December 2011, they had $166M in the bank which is normally considered a healthy balance. They spent $66M in the three months to March 2012 leaving $100M as at 31 March 2012. Per March Appendix 5B, they plan to spend $67M in the June quarter. At that rate, they won't have enough to get to the end of the September quarter. Perhaps the development expenditure will slow down next quarter.

The part of the June forecast cash spend of $67M that concerns me most is the $12M in production. The most concerning part is that it is marked with an * which say "net of production revenue". Could this just be a timing issue with production costs this quarter and revenue not being recieved in the bank until next quarter? Could it be that it will be some time before production is cash flow positive?

The questions in my mind are:

* how long before the production is cash flow positive;
* will they run out of cash before they get become cash flow positive;
* if they run out of cash, what is the source of finance (Does any one know if the major shareholder has available cash - I haven't checked that yet);
* if production does become cash positive before running out of cash, will it be enough to fund the exploration and development of other projects.

Worth keeping an eye on too see what further information comes out in the June quarterly.