what will it take , page-29

Fitnfam

It was your comment regarding the removal of the hired generators that caught my eye. The 8 owned generators which supply 2.2MW of capacity are circa 38 years old. Also, as far as I understand that including the 5MW hired generators the mine was pretty much at the limit regarding power capacity to achieve the 3.5Mtpa throughput with no redundant capacity.

Your comment regarding the return of the hired generators sparked my interest because DML would have no other option than to replace these with:

- purchased equipment; or
- leased equipment.

Based on a total generator CAPEX of $10.7 million being for the whole required power of 7.2MW this would equate to circa $1.5 million per MW. Sounds about right (notwithstanding that the original BFS included the full amount of the cost of the generators but DML went and hired 5MW).

If they replaced the hired 5MW this would require cash or a lease/loan of circa $7.5 million. If:

Purchase - that is very interesting considering the current cash position of the company;

Lease/Loan - this would have to be agreed with the senior lenders, which gives further evidence for lender support, notwithstanding that the lessor would have first security over the equipment ahead of the senior lenders. A lessor would also want to do their DD to ensure they are going to get their money back from operations, otherwise they could tear up circa 50% of the original cost getting back the equipment and reselling it.

This becomes quite an important comment and one that may require the company to confirm.