Breakout, page-9

I like where the price of this company stock has been heading. However, I have sold a bit of over the past month as the price increased. I did not do that because I think the company is not going to do well. Rather, at the current price, the company is being valued as if it is a mid-tier company. The current production level is 100-115koz p.a. at AISC $1 350-1 550/oz, still justifying itself as a junior producer. Further, the company currently has a relatively thin net cash position of around $8m after deducting the $8m loan from the 5 015oz gold loan arrangement.

Going forward, I believe Red 5 is going to do well. However, for KoTH to deliver more ounces and hence propel the company to mid-tier status, I suspect they will need additional funds. I believe that it is possible they do a modest equity raising, although debt funding is also likely. However, either one of them may result in the stock price pulling back a bit because the current cash balance is thin and the AISC is still quite high. Should AISC improve and they generate more free cash flow, then that may be a different story.