I was out by 19 mill on the last report. I attribute this to the rise in Brent & AUD impacts.
Looking at Brent, I see it as negligible going forward but I made an attempt to better factor in the AUD effect. It should make me much closer this time.
So, with 2 months of data in for this half, it looks as though KZL has gone cash-flow positive from a -15 mill EBIDTA loss in the first half and should earn approx. +7.6 mill of positive EB(D&A) this quarter and approx + 6.8 mill of EB (D&A) next quarter. That means that I have accounted for tax, interest, operational expenditure, C1 costs etc and allowed 1 million for mine development at King Volume. It excluded depreciation, which as a paper item doesn't bother me so much.
On that note the depreciation added to last quarter that tipped them into a much larger loss, is very high compared to last year. If anyone is at the AGM. This should be the number 1. question. What is their depreciation model going forward and could they include some details with respect to their depreciation schedules in the financial reports in particular? I just can't make head or tails of it. Last year it was 47 million and in this first half yearly it doubled to as much as all of last year. This distorts things dramatically and misrepresents the true state of affairs.
The other thing is production. I have based production on very low numbers as per guidance. I suspect these were set low to avoid further disappointment, so there could be upside here as traditionally Kagara is able to increase production after the wet season, which may help to lower C1 costs more than expected as well as contribute more tonnage. I have not allowed for this as it is potential upside.
I have factored in over 50% of savings from operational cost cutting, which should be halved by 12 mill from 24 mill. 120 people is probably circa 9 mill of this plus the consolidation of operations after Lounge Lizard etc, sale of office equipment, maintenance etc etc. So it looks doable.
The key performance measures to look for in the activity report then will be actual C1 costs which KZL normally state, a statement about progress to reduce operational expenditure and maintain or increase production levels, and mostly importantly cash at bank to confirm the cash burn rate if there still is one or how much cash they are generating now all things considered.
Peace out, BB.
KZL Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
