Strong buy, page-20

I feel a note of warning also needs to be taken into consideration. Agreed that BB has runs on the board the question is how much of the current progress in puff; the answer is that i don't know. However any purcahser needs to be aware of:

1. NST has purchased from a high cost mine (Plutonic) from Barrick. I understand that NST have dramatically reduced staff at this plant to reduce AISC. I hope it works out but do you not think that Barrick would have done the same thing. Question is are they going to be able to survive at this low level of staffing (the numbers tend to creep up).
2. The economics of any mine is all about grade. If they find High grade then they will produce ounces which goes into the denominator of the AISC and gets the price/oz down. NST claim high grades but any miner will tell you that you sometimes hit lower than expected grades.
3. The can hit disruptions to processing - these cause chaos.
4. NST claim that at Jundee they bought the mine and afterwards found that Newmont had drill data they had not looked at which revealed an upgrade. Do you really believe that Newmont would have been completely unaware of this? Upgrading old results (sometimes by reducing cut off grade) is an old trick. Hopefully NST are not doing this.
5. Kundana has refractory gold gold that needs to be concentrated and then passed though a roaster (autoclave) before gold can be expected. This add to the costs and is polluting. KCG are getting rid of their autoclave and going to ultra fine grinding due to pollution. Down the line NST may hit this problem and in any processing the refractory gold will always be more expensive than free milling gold.

The hazards of gold mining and unexpected additional costs (and lower grade) are intrinsic. NST cannot control the PoG and can go pear shaped (hopefully not)- the risks (and hype) have to be appreciated. Any gold miner is risky, even majors have hit major problems.