Gold miner Phuoc Son in dire straits before timely mining license extension

Phuoc Son Gold Co., Ltd fell into low liquidity right before the central province of Quang Nam stepped in to ask the Ministry of Natural Resources and Environment to extend its mining license at Dak Sa gold mine in Phuoc Son district earlier this year.

As of December 31, 2023, Phuoc Son Gold had respective short-term assets, inventory, and short-term debt of VND434 billion ($17 million), VND416 billion, and VND147 billion, resulting in its quick ratio of only 0.12.

In theory, a quick ratio of less than 0.5 "reflects that the business is having difficulty making payments and has low liquidity". The board of directors also admitted that the company was facing liquidity problems.

"The company's liabilities are mainly unsecured due debts according to the list of creditors approved by the People's Court of Quang Nam province and long-term loans from individuals. On December 31, 2023, the board of directors believed that liquidity risks would not have a major impact on the company's business activities,” said a representative of Phuoc Son Gold.

This was not the first time Phuoc Son Gold had encountered liquidity problems. On December 31, 2022, the company's quick ratio was 0.47.

Phuoc Son Gold repeatedly recorded this low liquidity as the company had large debts and could not clear its accumulated losses.

Its revenue from sales and services decreased from VND749 billion to VND700 billion ($27.5 million). However, the company still posted an after-tax profit of VND50.9 billion ($2 million), but a steep fall compared to VND177 billion in 2022.

However, this profit was not enough to compensate for years of constant losses. As of December 31, 2023, the company had racked up accumulated losses of VND1.14 billion ($44.78 million). As a result, its equity plunged from VND1.34 trillion to only VND202 billion ($7.94 million).

Because of these large accumulated losses, Phuoc Son Gold's cash flow has remained negative. At the end of 2023, the company saw VND6.9 billion ($271,050) in losses.

Weak cash flow has made the company incur notable debts. At the end of 2023, it recorded nearly VND1.24 billion ($48,710) payable in trade union fees, social insurance, health insurance, and unemployment insurance.

At the end of 2022, Phuoc Son Gold owed only VND117 million ($4,596) in trade union fees, and no insurance fees. It also had to pay VND15.7 billion ($616,774) to employees, up VND9.5 billion from 2022.

In addition, the company reported tax arrears. As of December 31, 2023, its taxes and payables to the state reached VND12.1 billion ($475,348), slightly down from VND15.1 billion a year earlier.

Ten years ago, Phuoc Son Gold had to stop production because it had hundreds of billions of VND (VND100 billion = $3.93 million) in tax arrears. In August 2016, it resumed mining at Dak Sa gold mine after two years of "freezing".

This was implemented after the Quang Nam provincial tax department approved Viet A Bank’s guarantee of its VND334 billion ($13.12 million) in tax arrears.

Established in July 2008, Phuoc Son Gold Company Limited operates in the field of gold mining. Its headquarters is located in Village 4, Phuoc Duc commune, Phuoc Son district, Quang Nam province.

According to the latest business registration certificate (June 2022), this company's charter capital is VND1.34 trillion ($52.64 million), contributed by Luong Thi Linh, VND306 billion or 22.836%; Nguyen Thi Mung VND700 billion or 52.239%; and Nguyen Dac Quynh Anh VND334 billion or 24.925%.