Ann: Las Lagunas Production Update-PGI.AX, page-27

I would guess that CASH costs are running at around 10.5 to 11M a Quarter. Costs are basically fixed .

Tons processed should be close to 195,000 a qtr. They have not achieved this level consistently in the past but now that lender restrictions will be off they can probably spend a little money to consistently achieve this level.

Grade is likely to come in at 3.8 or maybe even better. Originally the resourse average grade was 3.78 but until this year they would have been lucky to average 3.4. so if the origial grade was accurate their should be a lot of better than average grade left.

Recovery was 52.6 in June due to a 4% increase in the flotation recovery. I doubt this can hold but we dont know. Their has been a trend though which is the higher the grade the better recoveries get. This makes sense to a degree in that the higher grade material is courser and probably has less rubbish in it once it has be through the griding mill.

So overall I will go for 195000*3.8/31.1*.505 = 12032 ounces of gold a qtr. I will use 60,000 ounces for silver.

So it all comes down to gold price

We have around 9000 ounces hedged at 1100, the remaining hedge is at 1327.

Assumming we clear the 1100 hedge this qtr then by mid sept all sales will be over 1300 if gold can hold up.

At 1300 revenue is around 16.4M less costs of say 1100 leaves 5.4M a qtr cash flow. Total debt is around us29M.

Remaining resource at end of june would be 2.44Mtons which is around 3years and 1 month.

The surplus cash generated from the project would be around 20M after payment of all debt and Govt 25% share from 2018.

Scrap value of the plant is 10M . Replacement value 120 to 140M.

If the company achieves nothing more except to run out the resource the the cash retrun in a wind up situation is 22 cents.

As a going concern with potentially several small(50,ooo tons) plants around the world the upside is massive. For the moment though they need to just keep plugging away untill they have some cash to actually do something.

Their is nothing but time(5 years) and money preventing PGI from producing 100,000, 200,000 or more ounces of gold per annum. But it will still be tough going until they can get DR govt approval for concentrate or another plant somewhere. If they can crack this issue then they will be able to expand quite quickly.

With enough patience and a bit of luck the share price could one day make a new high of over $2.

While this may seem a fantasy at this time at least the company is now solvent and on a safe financial path.

At current prices their seems almost no downside as a long term hold. The upside could be not a lot or it could be massive. And it will only take 12 to 18 months to find out. Given it took 14 months to re-finance from the day another excited shareholder called me late at night to tell me Brian had just confirmed to him from the US that the financing was done. Then I can wait another 12 months.