response, page-14

Blythefan,

tha "analyst" is a geo (sorry) and he seems not very experienced with NPV calculations. The 1.50$ target was set by a different analyst last year.

As far as the 15% free carried Government interest I feel quite ok with that. Malawi is amongst the poorest countries in Afrika but the Government seems very decent. Mark told me that GBE hasn't had one indication for corruption since they started in 2006.

In fact the 15% is no royalty because a royalty is based on revenues and not on profit. In fact a 5% royalty could cost you similar amounts of liquidity than a 15% profit share.

160m$ revenues* 5% = 8m$ (royalty to Gov)
.
.
.
70m$ profit before tax - 27.5% tax = 50,75m$
50.75m$ * 15% = 7.6m$ (profit share to Gov)

Additionally the Government participation goes along with some other goodies and in fact it doesn't matter that much.

Mark told me that a 50:50 share will be targeted but depending on the market conditions it could either be 60:40 or 40:60. It will mainly depending on the off-take agreement.

Just getting back to the assumptions. In my view 500US/t handling costs is by far too much. The whole cost side is fairly intransparent but trucking 6.000t of concentrate to Nacala wouldn't cost you a fortune and usually long-term contracts will be negotiated FOB and not CFR - so no further transportation cost occur exHarbour. If you hire 240 truckloads p.a. at 1000km return you have to pay 480,000 transportation km...at 4-5US$/km all incl. transport will cost you 2m$-2.5m$ per year. And what is marketing cost? I think total cost will be below 60m$ per year.

Here is another link to a recent publication in Malawi.

http://www.dailytimes.bppmw.com/article.asp?ArticleID=9151