running the numbers, page-2

I hardly think 4th quarter was disappointing. Cash flow from operations was $20 million US, or about $25 million CDN. The company is currently trading at around $100 million CDN.

If you focus on earnings, you will get a distorted view of the company. And actually, with two years of results that include hedges, what do you think is going to happen to the $130 million in derivative liabilities? If you understand financial accounting, you will understand that over the next eight quarters, all of that will be brought back into income as the liability is reversed out. I would expect quarter one to have a small charge, and possibly even a small derivative benefit, but after that, you will begin to see larger derivative benefits on the income statement. Ironically, those same individuals who hammer OGC for its losses (almost entirely due to derivative charges), will then state that the high earnings should be ignored as it is comprised 50% of non-cash items.

Cash flow from operations and free cash flow are the most important profitability metrics for a miner.

I am going out on a limb here, but using the assumptions of 77,000 ounces of production, $350 cash cost, $3 million administrative, $4 million interest, then OGC will do $25 million operating CF CDN. Of course, these are on the optimistic side, but I feel costs will surprise, and 1st quarter production will be the highest for the year, as I am sure their forecast range includes the lower grade areas anticipated for 4th quarter, and any potential impact from the autoclave rebricking in 2nd quarter.

I actually think OGC can do about $10 million in earnings, this assuming $13.5 million in depreciation, and a small derivative benefit. I am assuming foreign currency gain/loss to be a wash, but it could result in a million or so charge. Of course, this assumes no unforeseen charges, and what closing price and exchange rate was used in the derivative liability calculation.