Ann: Commencement of Mining, page-6

I know that there is very little chatter on HC concerning EXG, which is surprising given the potential of this company. I have been a shareholder for a few years and my entry price was much higher than the current share price. However, this company has a fantastic asset and is blessed by being in very close proximity to established infrastructure and so I am happy to sit and wait for the share piece to come back.
These guys run on the "smell of an oily rag "and have done an amazing job to get into production given the horrendous market conditions over the past 2 years. I have a geology background and was first attracted to EXG because of their project - notably a decent resource at a better than average grade and with massive exploration upside. I know that they have only declared a resource of around 1.4 million ozs, but I think that they are sitting on a mineral camp and at the end of the day, they could well have 3 -5 million ozs in their tenements.
We won't know that until much later as clearly they will only ever drill ahead enough to get the next mineable resource, now that they have commenced mining. However, if you look at the size of the deposits in the immediate vicinity, you can see that they are all of the order of plus 2 million ozs. Back of the envelope calculations has them producing around 50,000 ozs pa at a margin of nearly $400/oz based on cash costs (bear in mind that their actual ore grade could be around 10% higher than the figure they state in their reserves) - that is around $20 million profit before tax and other charges and costs but when you realise that they only have around 567 million shares, that gives a ballpark earnings of nearly 2c a share. On even the most conservative PE ratio of say 5-7, that says that they should be trading much higher than they are at the moment. I am sure that once they get 6 months of steady operation behind them and their costs are established, the market will wake up to what a good stock this is.
In terms of the question are they a takeover target, the answer has to be a BIG yes. Norton has missed out on getting Phoenix and is desperate for soft and higher grade ore and must be looking at EXG as a potential M&A or takeover target, given the quality and size of its current resource, its serious exploration potential and the proximity to the Paddington mill..