Peers, page-11

CPDLC, is it the reported profit or the cash flow that really matters? Going by the sp I don't think the market cares about the reported profit.

After the June report I came to realise that what the company was reporting (whether following legitimate reporting standards or not) and what was going on with the cash flow were two very different things. The way the sp reacted, I wasn't the only one concerned about that report. By the June qtr and certainly by the Sep qtr, the company should have completed the majority of its plant and any mine development up front capex expenditure, so I was looking for the reported cash profits to show through to the cash position but it did not. As I see it, cash spent in the Sept qtr is going to be close to what will be spent on an ongoing basis. There will be little reduction as there were no major one off capex expenditures. Smaller capex items will be an ongoing necessity. Current guidance for the haul shaft upgrade and a new shaft back up my view that the sept cash outflow will be maintained (approximately) on an ongoing basis. If that is the case, at around $1200 gold this company is not cash flow positive and IMO will not become cash flow positive unless the grade picks up strongly. Unfortunately latest guidance is not forecasting any significant grade improvement for the Jan - Jun 2015 half. To make things worse the company is guiding for an increase in cash cost at a time when the POG is unfortunately continuing lower. I can't see how the cash flow is not going to be negative going forward regardless of what the company might report as an accounting profit. If the cash position does not increase, how will the company pay a dividend? If they can't pay a div and unless you expect a big turnaround in POG soon, why would you want to invest?

I would have hoped that with roughly fixed ongoing expenditure and with improving recovery increasing produced ounces, there might have been a forecast drop in cash cost/oz. However latest guidance has forecast increased cash costs despite forecast improvements in milling which should benefit recovery further, and modestly increased production. Have you any thoughts on why costs/oz guidance is for an increase in the second half rather than a fall?