looks good punters, page-20

I had only a few minutes to read through the announcement around noon and my general impression is it was bad news and the share price would drop...was tempted to sell with the shares trading at 6.7c, but decided it was a knee-jerk reaction and that needed more time to digest and read through.

I am glad I didn't sell, whilst I still think it wasn't really a positive announcement I had missed the point that I believe the share price is seriously undervaluing the assets held. This is how I understand the announcement (which to clarify is about both the mining study and the resource upgrade):

Postives
- Significant percentage of the resource is now in the Measured and Inferred categories (geological uncertainty decreased)
- Most attractive development scenario for Los Calatos has been identified with an open cut to a depth of 500m and underground thereafter

Negatives
- The cut-off grade selected for reporting the resource in the open pit part is extremely low and renders a low grade resource which is unlikely to be economically processed through a flotation plant
- The cut-off grade selected for reporting the underground section is low and delivers a resource grade which is low for an underground operation
- The tonnage has decreased from the previous resource estimate (most of this is to be expected as a higher cut-off grade has been applied to the underground section of the resource). The April resource statement had a total of 1,213 MT at a Cu cut-off grade of 0.35% . This Resource statement has a total of 1,200MT at a cutoff grade of 0.35% Cu-eq.Note that this is a slightly lower cutoff grade than 0.35% Cu)

Opportunities
- Pit optimisation studies will focus on higher grade parts of the resource. At a Cu-eq cutoff grade of 0.35%, the resource looks like this:

132Mt @0.51%Cu, 310ppm Mo

This would support a 45,000 tpd processing plant for 8 years producing 73,200t of Cu in concentrate per year an potentially 5,100 t of Mo in concentrate per year

Assuming CAPEX of US$1 billion, a profit margin of $2500 per tonne of Cu it is still an NPV positive project even without the Moly revenue. Put in the Moly revenue and you get a fantastic IRR.

This last calculation shows that the project is still attractive and undervalued and why I am not selling at these prices. I have no doubts the project will be progressed through to prefeasibility stage.

In terms of capital raising, not sure when it will happen, but if it does I believe it will focus on Canadian investors with perhaps a listing in the TSX hence why the resource is being made to be compliant with NI 43-101

Alejandro
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Do your own research, this is not investment advice
BDR, HCH, MNC