SMO smc gold limited

profit announcement

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    HOMEX - Brisbane

    Welcome to the sixth AGM since SMC Gold became a public company.

    2001/2002 was another very challenging year for your company. The
    bottom line result was a loss of $2.058 million. This included a
    write down in the carrying value of our Far Fanning mine so the cash
    deficit was $720,000 ($550,000 operating cash flow deficit). We also
    suffered a significant tragedy during the year when Shane Prowse, a
    young miner, was killed in an accident in the Hadleigh Castle mine.
    We continue to play enormous attention to safety and believe that
    over a period our safety record will be the equal of any mining
    company in the industry.

    Since the year-end, our long awaited return to profitability has
    been achieved. You will have noticed in our recent quarterly report
    that we made a profit of $268,000 in the first quarter (and positive
    cash flow of 624,000) and we confidently expect to be profitable in
    the December quarter. In fact in October and November we have
    already reached our first quarter profit. The Far Fanning mine which
    will cease open cut operation in January and February has been
    contributing well and we continue to improve our performance at
    Hadleigh Castle. The ore body is improving in both size and grade as
    we go lower. The current level, which is 815, has more than 3 times
    the quantity of gold that contained on the 890 level 75 metres
    above. This is leading to a much more profitable operation in what
    has been a frustrating mine.

    We plan to begin a small underground mine at Far Fanning when the
    open cut runs out. This should take 14 months to complete which will
    give us time to put other orebodies in place. We are hoping our open
    cut team can move on to the Christian Kruck mine, which has ore very
    close to the surface. Once again a very short-term mine, but should
    be very profitable.

    We have also just completed a significant toll treatment job for the
    now closed Mt Leyshon gold mine. When we listed we expected to win
    quite a bit of this work but there has not been much because of the
    low activity in the area caused by a low gold price drying up most of
    the exploration activity.

    Earlier this year we completed a ground mag survey of the prospective
    mine corridor area on our ground. This has thrown up some quite
    exciting data, which is starting to attract some attention. We do
    not have the free cash to undertake extensive exploration drilling so
    we hope to enter a joint venture with someone to allow them to spend
    money and earn a percentage of any ore body that is discovered. One
    major gold company and one smaller have approach us to look at the
    data and both are keen to strike a deal.

    On a negative note, the placement, which was sanctioned by
    shareholders at an AGM in may, did not proceed. Despite numerous
    assurances from Equity 1, the money did not arrive. To this day we
    do not know why. Don't be too concerned by that because the money
    was to repay debt not to keep us afloat. We hope to do that more
    slowly by profitable operations, which will give us the platform to
    raise capital in the reasonably short term.

    In summary, while conditions are still tough, we have considerable
    cause for optimism that our loss making years are behind us and we
    can grow the business profitably from this point forward, while
    tapping into some of the undoubtedly exciting exploration potential
    of out tenements.

    This announcement has been made in the interest of keeping all
    parties informed as to the company's current operations.

    RG Kidd
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Currently unlisted public company.

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