ASX chucks junior mining companies on the grill over gloomy cash reports

Embattled junior explorers are once again in the firing line of the Australian Securities Exchange with a number receiving “please explain” letters regarding their gloomy June quarter 2017 cash flow results.

With the June quarter reporting season behind us, the ASX has recently had the unenviable task of trawling through all listed company’s Appendix 5B cash flow reports.

If the company is found to have negative operating cash flow and the ASX believes it may not have enough cash to fund its next two quarters then the company is sent an Appendix 5B query and asked to respond to a list of questions relating to its cash flow position.

So far, four junior explorers have been sent letters with many more expected to come over the next week or so.

The most extreme case so far has been Papua New Guinea-focused gold play Niuminco Group (ASX:NIU) which reported a measly $1000 cash at end of June quarter but expects to spend around $580,000 in the current quarter. The company also reported negative operating cash flow for the June quarter of $74,000.

The company’s operations include the producing Edie Creek gold and silver mine located in the Morobe Province of PNG where the company has been trying to scale-up ore processing capacity.

When quizzed by ASX as to whether it can continue operations, Niuminco said it expected revenue and overall financial performance to improve during the current financial year and was in talks to obtain a $960,000 loan and fee repayments during the current quarter.

“The company has been able to raise capital in the past as required to support its activities and is confident that it has the ability to raise working capital if required r deemed necessary,” the company said in its response to the ASX.

Niuminco also advised it would remain in negative operating cash flows until installation, commissioning and testing of its new processing plant and circuit at Edie Creek was completed, and larger more consistent volumes or higher grades of ore were able to be processed.

Another one to be pinged was copper-gold explorer Golden Cross Resources (ASX:GCR), which reported a cash balance of $340,000 at the end of June quarter 2017 and estimated cash outflows for the current quarter of $250,000.

In its response to the ASX, Golden Cross said it was in discussions with major shareholder HQ Mining Resources Holding Pty Ltd, broking firms and potential investors to help fund its planned work programs.

“HQ Mining has indicated its intention to fully participate in future capital raisings and meetings are planned during August to finalise the form and timetable for securing funding to progress Copper Hill and the company’s other projects to the next stage,” Golden Cross said.

Golden Cross also noted it had a $200,000 loan from HQ Mining plus $16,000 interest due for repayment mid this month, but was hopeful it would receive an extension on the loan.

HQ Mining took effective control of Golden Cross in early 2016 after increasing its shareholding to almost 77 per cent. Since that time, HQ has provided funding to Golden Cross through a series of loans with the sale or joint venture of non-core assets helping to pay off those loans.

The company’s primary focus is the Copper Hill copper-gold project in central New South Wales.

Another company to be slapped with a query is aspiring silver play Silver Mines (ASX: SVL). The company spent $3.14 million in the June quarter and was left with $3.55 million to meet its current quarter outflow of $2.38 million.

However, Silver Mines said it was comfortable with its current financial position and had previously shown it could raise funds when needed.

“The company expects to be able to continue its operations and to meet its business objectives going forward,” Silver Mines said.

“The company currently has sufficient funds to meet its expenditure budgets for the foreseeable future.”

Silver Mines is currently at the feasibility study stage for the development of its flagship Bowdens Silver project in New South Wales.

The company has been carrying out an extensive drilling program at Bowdens which is planned to increase silver resources within and in the immediate vicinity of the current resource area, convert resources to higher levels of confidence and further test high grade polymetallic mineralisation at depth below current resource area.

Another explorer to receive a query is Chile-focused Equus Mining (ASX:EQE). The stock had $1.1 million in its bank account at end of quarter with $590,000 expected to be spent in the current quarter.

The company is currently undertaking a 2000m drilling program at its flagship Los Domes gold-silver project in Chile, for which it raised $1.6 million in March.

Equus said the program was expected to be wrapped up in the current quarter with December quarter spending to be down considerably.

“With the existing cash the company will have more than sufficient funds to keep operating for more than two consecutive quarters,” Equus said.

The company said it would assess whether further funding was required for future exploration depending on results received from the current drilling program.

As at 12pm AEST on Wednesday, shares in Niuminco Group and Golden Cross Resources were trading unchanged at 0.2c and 0.9c respectively, Silver Mines was trading 4.8 per cent higher at 11c while Equus Mining was down 4.2 per cent at 4.6c.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.