The key to kagara’s future lies in the sale of Lounge lizard, if this can be achieved there should be ample cash to execute their strategy. A few things i picked up on in the quarterly: Negatives: • Obviously the high production costs pose an imminent threat to the company. By my calcs the cash flow from operations for the quarter was around +8 to9M. Factoring in CAPEX, overheads and exploration expenses the company is burning cash and with only 10M in the bank could be in trouble in the near future. • Any further decline in Zn or Cu could land KZL in real trouble. Just a reminder that in 2007 Zn dropped to around 40c/lb and Cu to around $1.50 • KZL has 92M in debt that appears to be current (i.e. needs to be refinanced in the next 12 months) • Drilling down plunge of the main ore body at Balcooma has not been successful yet, but only early days. • Recovery rates at Thalanga are shocking, met issues i trust. • No exploration seems to be underway at Thalanga Positives: • The new MD is good, i think over time he will turn KZL into a professional mining company that hopefully losses its reputation of under delivering. • Unit based costs have been reduced by 20%, while not apparent in the numbers this is promising. • King Vol is shaping up to be a good project. • The Chillogee exploration is very promising and will work nicely with the proposed treatment plant at Mungana if it is ever constructed.
KZL Price at posting:
29.5¢ Sentiment: Hold Disclosure: Held
