A Quarterly Cashflow Report (officially known as Appendix 4C or 5B) is a quarterly reporting requirement for some ASX listed entities designed provide investors with additional information around whether these entities are meeting their operating objectives.

Who must release Quarterly Cashflow Reports?

There are 3 different classes of entities that each must submit Quarterly Cashflow Reports to the ASX:

- Mining exploration entities (Appendix 4C)

- Oil and gas exploration entities (Appendix 5B)

- Commitment test entities* (Appendix 4C) The ASX requires exploration entities to continue producing Quarterly Cashflow Reports while they continue to be mining exploration entities, with the obligation ceasing once they transition to mining producing entities. For commitment test entities, the ASX requires this rule to apply for at least 8 consecutive quarters, with discretion to extend the requirement longer on a case-by-case basis. These reports must be submitted to the ASX within one month after the end of the relevant quarter or face suspensions of their securities from quotation. The ASX also has the power to ask any other entities to publish Quarterly Cashflow reports for a set period under Listing Rules 4.7B and 4.7C.

Reading a Quarterly Cashflow Report

Operating Cashflow

Operating cashflow refers to the receipt and payment of cash incurred during the normal course of business. This segment does not contain items relating to the long-term capital expenditures or investment transactions. A positive operating cash flows figure indicate that the core business activities of the company is strong and that the company is generating cash from existing operations. However, it is often normal for exploration entities to have negative operating cash flows as the nature of their business often provides no cash receipts until they transition to a developer. For mining companies, investors should pay attention to the exploration and evaluation expenditure to assess how much the company is paying for exploration related activities.

Investing Cashflow

Investing cashflows are cash flows related to the acquisition and disposals of assets relevant to the business. This can include capitalised exploration expenditure, purchase of physical assets or acquisition/disposal of companies or securities. Growth companies often exhibit negative investing cashflows as cash is invested into assets to support long-term growth. In these cases, the company will seek to monetise the investments in the future and recognise a benefit to shareholders. An example of this may be the acquisition and disposal of some mining tenements or projects.

Financing Cashflow

Financing cashflows is cashflows related to the change in the company’s capital structure, such as equity or debt. More specifically, this section relates to external fundraising items such as issuing or shares, borrowing proceeds/repayments and any dividends paid. Investors can consult this section to assess how much external funding an entity has used as a sign of their dependence on outside capital.

Reconciliation of Cash

This section provides investors an overview of the cash balance and a breakdown of the source of funds.

The holdings of the cash are also required to be distinguished as they may yield different implications i.e. bank balances vs bank overdrafts.

Other Key Sections

Section 7 – Financing Facilities

Section 7 provides additional information about the debt facilities av available to the entity and the extent they are drawn down.

Section 8 – Estimated Funding Available

Investors should also take note of Section 8 of the 4C/5B reports which highlights the estimated quarters of funding available to the entity (consisting of cash on hand + undrawn debt vs outflows). If this is less than 2 quarters, then 3 additional questions must be answered:

1. Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and if not, why not?

2. Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely it believe that they will be successful?

3. Does the entity expect to be able to continue its operations and to meet its business objects, and if so, on what basis?

This additional information is forward looking and addresses whether the entity meets the requirements in Listing Rules 12.1 and 12.2 that the entity’s level of operations is sufficient and its financial condition adequate. Section 8 may require the entity to disclose confidential information about an incomplete transaction (such as a new capital raise).

*A commitment test entity is:

- An entity admitted to quotation under the commitments test in Listing Rules 1.3.2(b); and

- An entity that has been required to re-comply with Listing Rules 1.3.2(b) because of a significant change in the nature or scale of its activities and the ASX has required re-compliance with admission requirements in Chapter 1 and 2 of the Listing Rules.