Ann: APPENDIX 4D AND HALF YEAR REPORT, page-23

Valuation need to start from somewhere and PE is always a good start. The likelihood of extensions are there for Cracow, it has had 2 year worth of LOM for the last 10 years since EVN (Catalpa/Conquest) acquired it from NCM. I'm not convinced yet with Tritton LOM but Constellation is very promising. FCF/DCF etc are calculated over 10 years because we have been doing it for a millennia probably more and we haven't yet found a better quantitative method valuing a business.

Think about it for a sec, if a company is very cashflow positive for the next 2 years (even if they don't find more mine life beyond that which I doubt) then the company will be able to deploy a war chest accumulated over that 2 years (plus debt and equity) for other opportunities. So in that sense, 2 mines right now doesn't mean it will be that static for the next few years. A good BOD has certain optionality due to current profitability and that needs to be priced into the business too. Think of it in terms of a mining companies life-cycle and you will understand why AIS can be valued beyond 10 years.

Now let's look at it in terms of real life example of a mining company life-cycle... Let's look at EVN since they owned Cracow prior and was one of their flagship mines at one point with the same LOM issues we are facing now. If in 2014 you think that EVN's foray into mining would have ended in 2016 (since they only had Cracow and Mt Rawdon), then you would have been severely wrong. Thanks to Cracow's positive cashflow, EVN was able to finance 3 mines from memory... Mungari, Cowal, Ernest Henry over that period and this shows in the balance sheet and SP moving forward...

Just like in life when you have a lot of Cash or an ability to earn a lot of cash then a lot of doors are open to you to earn more... Moreover a good company is never static as it will search out growth moving forward and deploy that positive earning. Mining is a very simply business model... you just need to keep doing 1 thing over and over again and that is to asset hop your way into the big leagues.