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Wilton Resources: Condensed Interim Financial Statements 2HFY24 · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome, welcome to the Deep Dive. Today, we're digging into the latest financials
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  from Wilton Resources Corporation Limited, WRC.
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  They're listed over in Singapore, but their main business, gold mining,
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  is happening in Indonesia.
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  So we've got the numbers here, unaudited, mind you, for the six months and the
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  full year ending December 31st, 2024.
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  And our mission really is to cut through all that accounting speak.
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  We want to understand what's really going on, you know, how they performed,
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  what's the story behind those numbers, and maybe get a sense of what the future
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  holds for them. Absolutely.
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  And what's really captivating here when you look at these documents is the picture they paint.
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  It's a company clearly facing, well, significant challenges,
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  but you also see them outlining their strategies, their potential ways forward.
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  It's fascinating how you can see both the struggles and the strategic thinking
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  just laid out in the data.
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  Okay, let's dive right in then. Thinking about the full year 2024 versus 2023,
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  what are the sort of big headlines, the main takeaways from the profit and loss?
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  Well, the big picture, it's definitely challenging. First off,
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  revenue. It saw a really sharp decline.
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  For the full year 2024, it was about 1.34 billion rupiah.
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  That's down a huge 66.4% from almost 4 billion rupiah the year before.
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  And even if you just look at the second
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  half of 2024, that was down 41.2% compared to the second half of 23.
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  So yeah, a consistent downward trend there. Wow.
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  66%. That's not just a dip. That's significant. It is. And it's not just an
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  abstract number. This directly reflects their physical sales.
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  WRC only sold 1.1 kilograms of gold door in the entire fiscal year 2024.
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  Compare that to 4.2 kilograms in 2023. It's a massive drop in actual output sold.
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  Okay, so far less gold actually going out the door. Exactly.
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  And that hits the bottom line, naturally. The net loss after tax for FY 2024,
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  well, it worsened considerably.
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  It increased to nearly 128 billion rupiah. That's up from a loss of about 53
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  billion rupiah in FY 2023. So more than double the loss.
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  Yeah. And that translates directly to earnings per share, or rather loss per share.
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  It went to negative 0.41 Singapore cents for FY 2024 compared to negative 0.13
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  Singapore cents in FY 2023.
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  Okay, so that's quite a dive. Revenue way down, losses way up.
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  Logically, you'd think gross profit must have just tanked too, right?
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  Yeah. Looking here, it actually went up. Yeah. How does that work?
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  That feels counterintuitive. It does seem odd, doesn't it? And that really raises the key question.
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  How can your gross profit increase when your revenue has fallen off a cliff like that?
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  Well, the gross profit did nudge up, yeah, by about 13.5%, from 431 million
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  rupiah to 489 million rupiah.
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  But the key, the absolute key, is the cost of sales. That decreased even more steeply than revenue.
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  It dropped by a massive 76.1%, from nearly 3.6 billion rupiah down to just 852 million rupiah.
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  So what this suggests is either incredibly low production levels,
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  or maybe they managed some really significant cost cutting, specifically tied
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  to the small amount they did sell.
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  Right. So the cost to produce that tiny amount of gold they sold was even tinier,
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  relatively speaking, making the profit margin on what they sold look better,
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  even though overall sales were terrible.
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  Precisely. It masks the underlying volume problem in a way.
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  Okay, this is where it gets really interesting for me. We see the what.
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  Now let's get into the why.
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  Why the massive revenue drop, even if the per unit economics maybe looked okay?
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  And what pushed that already significant loss into, well, such a deeper hole?
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  Well, the why for the revenue drop links directly back to what we just talked
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  about, that operational downturn, the sales volume plummeting from 4.2 kilos to 1.1 kilos.
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  That clearly points to major issues in actually getting the gold out and processed.
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  Right. Production problem. Exactly.
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  Now, here's a bit of a paradox. While their volume tanked, the price they got
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  for the gold door they did sell actually went up.
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  The average selling price increased from about $1963 US dollars an ounce in
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  FY23 to $2230 US dollars an ounce in FY24.
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  So the market price for gold was actually helping them, or it could have helped them.
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  It could have, yes. If they'd been able to produce and sell more,
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  those higher prices would have been a real boon.
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  But the lack of volume basically wiped out that advantage. Okay,
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  so production issues are key.
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  What else contributed to that much bigger net loss? A huge factor,
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  absolutely huge, was the change in other income. It dropped by over 92%.
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  What was in there? Well, in FY 2023, they had a very large one-off game,
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  about 159 billion rupiah.
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  This came from modifying the terms of a project financing liability.
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  That gain wasn't repeated in FY 2024. It was a one-time event.
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  So without that large injection of non-operational income, the underlying loss
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  from their core activities became much more visible, much starker.
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  Ah, I see. So it's like they had a windfall last year that propped up the numbers,
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  and this year that safety net was gone, revealing the real operational struggles.
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  That's a good way to put it. That one-off item really skewed the comparison
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  between the two years. Okay. What else was hitting them?
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  Another significant hit came under other expenses. These absolutely soared from
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  about 1.3 billion rupiah to 28.6 billion rupiah. Wow. What drove that?
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  Primarily, foreign exchange losses. The Indonesian rupiah weakened quite a bit
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  against both the U.S. dollar and the Singapore dollar during that period.
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  So even if it's partly a paper loss due to currency movements,
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  it's a real hit to the reported bottom line in rupiah terms.
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  Right. Unavoidable external factor there.
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  Any bright spots? There was one actually related to finance costs.
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  They decreased significantly by about 77.2%. And this links back to that same
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  project financing liability we mentioned earlier.
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  Because of the modification they did in FY 2023, the interest expense recognized
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  for that specific liability dropped by about 107 billion rupiah.
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  Okay, so the move that gave them the one-off gain in 23 also helped reduce their
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  ongoing interest costs in 24.
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  Exactly. A direct consequence. Although that saving was partially offset by
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  some higher interest on bank overdrafts, but the net effect was a big reduction in finance costs.
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  And general admin costs, did they manage to keep those down?
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  Not really, no. General and administrative expenses actually went up by about
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  13.9%, mainly due to higher professional fees, about 7.3 billion rupiah more,
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  and also increased staff remuneration,
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  around 2.6 billion.
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  So some fixed costs are still creeping up even while the main operation struggles. Seems that way.
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  Yeah, some underlying cost pressures there. Okay, so if I'm piecing this together...
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  The story isn't simple. It's a combination, isn't it? Lower production hitting
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  revenue hard, then the lack of that big one-off gain from last year making the
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  loss look much worse, plus those currency headwinds piling on.
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  Even though they did manage to cut finance costs related to that big liability.
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  It paints a much clearer picture now.
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  That's a really good summary. It was a confluence of factors, definitely.
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  Internal operational issues met unfortunate timing with disappearing one-off
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  gains and external pressures like Forex. All right.
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  We've looked at the flow, the profit and loss. Let's turn to the balance sheet.
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  What does their financial position look like? What changed there?
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  And what does it tell us about their overall health, their stability?
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  Okay, the balance sheet.
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  If we look at the big totals first, total assets actually increased slightly,
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  ending up around 707 billion rupiah.
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  But, and this is a big but, total liabilities increased much,
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  much more dramatically.
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  They went from about 480 billion rupiah at the end of FY 2023 to 627 billion
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  rupiah at the end of FY 2024.
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  So assets up a little, liabilities up a lot. That doesn't sound great for the
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  equity position. It isn't.
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  And if we connect this to the bigger picture, probably the most critical point
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  on the balance sheet is the change in their current liabilities versus their current assets.
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  Their net current liabilities, meaning short-term debts, exceeding short-term
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  assets, the deficit just ballooned. How much are we talking?
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  It went from a deficit of about 112 billion rupiah in FY 2023 to a massive 548
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  billion rupiah deficit in FY 2024. Whoa.
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  548 billion rupiah short on the near-term obligations.
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  That sounds like a serious liquidity issue. What caused such a huge jump?
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  The single biggest driver by far was the reclassification of that project financing
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  liability we keep mentioning. The one they modified.
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  That's the one. An amount totaling about 334.6 billion rupiah related to that
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  liability was $1.5 billion.
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  Was shifted from being a non-current long-term debt to being a current liability.
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  Meaning it's due soon. Exactly. It means that very large amount is now due for
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  repayment within the next 12 months specifically.
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  The documents state by February 2025.
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  Okay, that is a huge shift. Suddenly having a massive debt payment looming just around the corner.
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  It is. And the liability itself also grew a bit due to interest building up,
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  the accretion, and also those unrealized foreign exchange differences we talked about earlier.
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  Makes sense. What about their actual cash? Did they manage to hold on to much?
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  Their cash position weakened.
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  Cash and cash equivalents decreased by about 1.5 billion rupiah over the year,
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  ending FY 2024 at just 2.9 billion rupiah. Very, very lean.
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  Extremely lean, especially given the scale of the liabilities we're seeing.
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  And all of this, the losses the liability shifts hammered their net asset value.
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  NAV attributable to the owners dropped significantly from 194 billion rupiah
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  down to just over 80 billion rupiah. And per share.
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  Per share, that's a drop from 0.63 Singapore cents down to 0.26 Singapore cents.
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  So the book value of the company for shareholders took a big hit.
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  So the reclassification of the big debt to current liabilities is really the
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  headline here, isn't it?
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  It signals a potential liquidity crunch, like you said, a huge payment coming
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  due very soon with not much cash on hand. That's definitely the major red flag
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  waving on the balance sheet, yes.
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  Given all these financial challenges, I mean, the operational shutdown we discussed,
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  these huge current liabilities piling up, how are they even thinking about the
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  future? What's the outlook?
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  Is going concern even on the table? Well, the outlook is heavily,
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  heavily clouded by that primary operational issue, the SEMA's Gold Projects
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  Processing Facility. As the
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  report states, it's been completely inoperable since early December 2024.
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  This was due to extreme weather linked to La Nina. The heavy rains and floods.
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  Exactly. Heavy rainfall causing flash floods, landslides. It knocked out power,
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  damaged roads and bridges.
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  Critically, operations haven't restarted. They still don't have enough electricity
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  supply for full operations.
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  And maybe even more importantly, access to the actual mine site is severely restricted.
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  They can't get essential supplies in like fuel. So the core business is effectively offline.
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  Pretty much at a standstill based on this report. And that's the backdrop for
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  the going concern discussion.
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  So how did the directors justify believing the company can continue?
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  Despite, you know, the production halt and that massive working capital deficit,
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  the directors state in the report that they do believe the group can continue as a going concern.
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  They list several reasons for this belief.
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  First, they're prioritizing evaluating strategic options, working with professional firms on that.
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  Second, they're focused on minimizing operational spending, which includes keeping
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  a lean workforce, basically, hunkering down on costs.
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  Okay, cutting costs makes sense. What else? They mentioned they're relying on
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  a working capital loan facility.
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  It's denominated in rupiah IDR $36 billion over 24 months.
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  They can draw down $1.5 billion per month. As of the report date,
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  they said there was still about $12 billion rupiah available to draw from that
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  facility. So some short-term funding lifeline there. A limited one, yes.
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  They also mentioned negotiating better credit terms with key suppliers,
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  trying to stretch payments, presumably.
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  And, crucially, regarding that big project financing liability, the U.S.
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  $21 million won due in Feb 2025, they state they are in amicable discussions
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  with the lender, Carl Hoffman Mineral Peat LTD.
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  And importantly, they note that as of the report date, they hadn't received
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  any demand for immediate repayment. So they're talking, and the lender hasn't
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  called in the debt yet. That's something.
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  It is. However, we absolutely have to mention the auditor's opinion from the
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  previous year, FY2023. What was that?
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  The independent auditor issued a disclaimer of opinion.
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  That's very serious in the auditing world. It means the auditor felt they couldn't
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  gather enough evidence to form an actual opinion on the financial statements.
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  They specifically cited uncertainties about the appropriateness of the going
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  concern assumption and also about impairment assessments of assets.
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  So the auditor basically threw up their hands and said.
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  We can't be sure about any of this. That's a blunt way to put it,
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  but yes, it signals major uncertainties.
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  The board confirms they've disclosed these issues adequately,
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  but that disclaimer from FY23 hangs heavy over the current situation.
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  Definitely adds another layer of risk.
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  It does. But then you have this powerful external factor, almost like a potential
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  lifeline if they can just survive long enough to grab it. Gold prices.
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  If we connect everything back to the bigger picture, despite all these internal
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  crises, the price of gold itself has been soaring.
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  The report notes an approximate 23% increase from around 2,075 U.S.
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  Dollars an ounce in January 2024 up to over 3,300 U.S. dollars by early July 2025.
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  And it even mentions projections for gold futures potentially exceeding 3,850 U.S.
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  Dollars an ounce within the next four years or so. Wow. So the very thing they
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  mine is becoming much more valuable.
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  Exactly. It provides a huge incentive, a potential massive tailwind,
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  If, and it's a big if, they can sort out the operational mess,
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  get the mine running again, and navigate that looming debt repayment.
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  It's like having a winning lottery ticket locked in a safe you can't currently
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  open because the house is flooded.
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  That's not a bad analogy, actually. The potential value is there,
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  maybe higher than ever, but accessing it is blocked by immediate severe problems.
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  So I'll try and sum this up for everyone listening. What does it all mean for Wilton Resources?
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  It sounds like they are truly up against it. You've got major financial headwinds,
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  that huge debt coming due, the core operations shut down by a natural disaster.
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  It looks pretty bleak in the short term, yet they seem to have some strategies.
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  They're talking to their lender. They have that small credit line.
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  And the potential payoff from rising gold prices is enormous if they can pull
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  through. It feels like a real high-stakes situation.
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  It really is. And this whole situation, I think, raises a fascinating,
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  broader question, doesn't it?
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  When you have a company facing these kinds of severe operational crises,
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  a mine shutdown, massive short-term debt, but they also possess a valuable underlying
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  asset like a gold mine, especially when the commodity price is booming.
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  How do you even begin to balance that? How do they balance the desperate need
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  for immediate survival, you know, just keeping the lights on and dealing with
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  that debt against the potential long-term value if they can ride it out?
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  What stands out to you thinking about all this as the single biggest challenge
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  or maybe the biggest glimmer of opportunity for Wilton Resources in the months ahead?
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  That's the question, isn't it? Survival versus potential. We'll have to leave
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  you, our listeners, to ponder that one. Thank you for joining us on this deep
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  dive into Wilton Resources.
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  As always, we encourage you to continue your own exploration of these complex company stories.