Two Interesting things, page-2

Hi Colonel,

That would indeed be welcome.

To put that into perspective, Mac Bank research anticipates a 7c EPS for FY2016 but a 15c cash flow per share (I am guessing a lot of D&A given the open pit is now only 6 years). Mac Bank estimate $105m in free cash flow in FY16 off a $145m EBITDA.

BDR will need to be depreciating their plant, equipment, buildings ($163m) over the 6 year LOM now despite the working life being much longer. Find more gold and the depreciation rates will reduce. Thus there will be a large difference between the cash flow and reported profit.

I believe that Mac Bank's numbers are reasonable if BDR's guidance of 209k oz is achieved for FY16 - despite what Dan thinks MACA will get the dirt moving sorted.

In this regard it makes me wary of BDR going on a premature, non-synergistic M&A spree using script at the current SP.

I have communicated my concerns to both PB and CR (Chairman) in this regard. My view is that they should proceed slowly with M&A, con-currently getting Tucano's productivity up to best-practice and releasing the Urucum PFS / reserves.

This in turn will see a re-rating and then, and only then, should a script offering M&A be considered (better IMO to use cash / debt); and then on the basis that any M&A adds incremental production (i.e. don't try and swallow an elephant), be geographically synergistic, operationally similar and with a simple process sheet.

I believe that Rob Watkins has the ability to identify these assets for BDR.

Flipping it around, Mac Bank also kindly do a quant analysis of M&A transactions concluded recently. On a resource basis the ave. is $118 per resource oz, or $273 per reserve oz (USD).

If BDR was the prey and not the predator shareholders could expect fair value around US$637m based on resources (@ $118 oz) or US$355m based on reserves (at the recently lowered level of 1.3m oz which some of us believe will increase by c. 500k oz when Urucum PFS is released). If you were to assume reserves will increase to c. 1.8m oz later this year (with Urucum PFS) then US$491m could represent fair value. Which ever way you cut it BDR is undervalued and 'only' needs to work out how to feed the mill consistently.

Cheers
John