...which shows you how little cash GCM.to has. And here's another...
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To be honest the NR that Serafino Iacono's Gran Colombia Gold (GCM.to) offered us on its 3q14 financials tonight isn't exactly a barrel of laughs either, as it reports lower than expected production and an unexpected rise in All In Costs from 2q14 (don't get fooled by the wordsmith who wrote the NR, because it's gone up from $1,203/oz to $1,216/oz).
NB: Please note cut-down Y-axis, done to show contrasts and not to try and fool you
But the NR glosses over the real problems at GCM, which you'll find on the balance sheet rather than any nominal quarterly profit or loss, G&A reduction or blahblah. Here's a chart...
...which shows you how little cash GCM.to has. And here's another...
...pointing you in the necessary direction to the real problem, because the working cap position is going from bad to worse and a full-on cash crunch is now a question of when, rather than if. But it's only when you open up the MD&A and read it that the scale of the upcoming back passage intercourse coming the way of equity holders becomes fully apparent. Read this, read it all, it's from the GCM 3q14 MD&A filed this evening, it's why this share price is going to nothing, it's your fundies analysis case study of the week:
Liquidity and Capital Resources
After using the remaining $3.0 million of the net proceeds from the March 2014 equity offering during the third quarter of 2014 to fund working capital and capital expenditures at the Segovia Operations, the Company’s cash position stood at $0.5 million at September 30,
2014. In addition, the
Company had $0.8 million of cash in trust from the Gold Notes to fund the
monthly interest payment on the Gold Notes at the end of October 2014.
To continue as a going concern, the Company must generate profitable operations in the future through its planned capital investments, including the completion of the modernization and mechanization of its Segovia Operations and resultant increase in cash flow from mineral production, or continue to secure new funding. While the Company has cash flow from operations, this may not be sufficient to fund the Company’s working capital requirements, including debt service, and the planned capital investment program not previously funded by the Gold Notes. The Company has a working capital deficit at September 30, 2014 (as described below) and, as such, it will need to pursue additional financing or delay discretionary expenditures which may have an impact on the rate of future growth in its mineral production and its ability to meet its working capital requirements.
At September 30, 2014, the Company had a working capital deficit, excluding the Gold Notes cash in trust, of approximately $69.9 million, up from $50.2 million at December 31, 2013. Key components of this working capital deficit at September 30, 2014 include:
· Cash - $0.5 million; as a result of the impact on operating cash flow of lower gold prices and lower than previously expected gold production from the Segovia Operations, cash is being turned over quickly to meet working capital requirements, including supplier payment programs and debt service, and capital expenditures.
· Accounts receivable - $13.0 million, including $11.3 million of recoverable taxes, predominantly outstanding VAT refunds in Colombia, $6.6 million of which are past due as of September 30, 2014. Despite the Company’s diligent efforts to meet the requirements of the VAT refund process in Colombia, it has continued to experience difficulty and delays in receiving overdue VAT refunds related to the Segovia Operations. Accounts payable and accrued liabilities at September 30, 2014 include approximately $3.0 million of supplier withholding taxes that the Company understood, based on the processing of prior VAT refund claims in 2013 by the local tax authority, would be deducted from its pending VAT refund claims when settled by the local tax authority in 2014. However, the Company has been advised subsequent to the applicable VAT reporting periods that it must pay the supplier withholding taxes in advance of receiving its VAT refunds. The Company is currently in discussion with the local tax authority to remedy the situation so the Company and the local tax authority can settle the existing balances outstanding between them. In the meantime, the Company has been paying its monthly supplier withholding taxes since the beginning of the third quarter of 2014 and is awaiting resolution of this matter in order to file additional VAT refund claims for a total of $3.8 million. This situation is beyond control of the Company and is exacerbating the Company’s cash flow situation in this low gold price environment.
· Accounts payable and accrued liabilities - $43.3 million, including approximately $3.0 million of supplier withholding taxes (as described above) and $4.8 million related to capital expenditures. As previously disclosed, the Company had arranged payment plans with certain significant suppliers to relieve pressure in managing the supplier relationships while it completes the Pampa Verde project at its Segovia Operations. Although the Company is currently continuing to service these payment plans, in response to the impact on operating cash flow of the lower gold prices, lower than expected gold production at Segovia and the VAT refund situation as described above, the Company is having to make alterations to these plans in certain cases to ensure it meets all of its obligations.
· Amounts payable for acquisitions of exploration and evaluation assets - $15.2 million related to the Marmato Project. The Company made payments amounting to $0.6 million under these agreements in the first nine months of 2014. The Company is making slow but steady progress in its process of negotiating extensions to the current contractual terms of the various mining titles acquisition and compensation agreements.
· Current portion of equity tax payable - $6.6 million, of which $3.1 million represents the final payments due for the Segovia Operations and is expected to be paid from the net proceeds of the pending VAT refund claims when settled. The balance of the equity tax payable relates to the Marmato and Zancudo Projects. The Company is continuing in its effort to implement payment plans to settle these obligations, although there can be no assurance such payment plans can be arranged.
· Short-term debt - $1.2 million representing amounts drawn by the Company’s 60%-owned CIIGSA refinery operation in Colombia under a revolving credit line (see also “Financing Activities – Colombian Debt Facilities”). As previously mentioned, the Company is working towards a potential sale of its refinery investment and expects that the purchaser will assume this short-term debt as a condition of the sale.
· Current portion of long-term debt - $30.3 million, up from $4.3 million at the end of 2013 to include the expected principal amount payable under the Gold Notes ($18.8 million) from the first three quarterly put options that come due at the end of January, April and July 2015 and the first estimated repayment of 10% of the principal amount of the Silver Notes ($9.0 million) due in August 2015.
· Current portion of provisions - $2.2 million, representing ongoing monthly payments of approximately $0.1 million to fund the acquired health care obligation in the Segovia Operations and $1.1 million related to the payments expected to be paid over the next 12 months under a payment plan still to be arranged with Corantioquia, the local environmental authority, related to the environmental discharge fees at Segovia.
Got all that on board? And on the way I hope you paid special attention to the second last bullet point in the list, the "current portion of long-term debt" bit.
Any further questions on GCM.to and its financials should be directed to the people that pumped this de-facto bankrupt waste of time and money to you back when it was cool. Along with the obvious snake-oil salesman Serafino, their names are Tommy Humphreys and Thom Calandra and they're the scumballs who get rich by ripping you off and then claiming innocence later.