$10 TARGET !!!, page-6

It’s interesting to read the annual report of Gold road .Which is basically the controlling entity of DEG.It was published a week ago and it makes interesting reading .Thier main mine Gruyère is operated by Goldfields and is slowly increasing production .Its currently north of 300,000 ounces.Gold roads profit has increased as has its cash flow .It is paying a dividiend and has increased its cash position by 50 million AU.
Overall a decent result .
They highlight the difficulties of operating a gold mine in Australia .AISC went up over 10% and is forecast to go up at least that this year .
This is due to labor shortages ,rising cost of fuel (getting worse right now due to Ukraine)and other factors including supply side issues and inflation .It makes interesting reading and every DEG owner should read it .
The profit has increased due to the rising price of gold but not as much as expected (Aisc increase was greater than predicted).
They do not have the financial ability to take over DEG(Deg is way too expensive) but they do say owning DEG gives them “optionality” whatever that means .They probably do have the ability to increase their ownership in Deg but the cost of construction of such a big mine in these times is clearly too much for them .
They could increase their controlling interest in conjunction with Goldfields and control the board more than now .This would be the obvious strategy for them .They will be able to pick up more cheap shares in the next DEG capital raise (which will tank the price of DEG down 20-30%)
In this way Gold road/goldfields could force to DEG board to be more sensible in these challenging times by stopping all unnecessary expenditure on useless exploration ,buying up Ashburton and exploring Novos property .Combined with building a much smaller mine of say 150-200,000 ounce with the potential to go to phase 2 expansion of out paid for out of cash flow and gradually over 5-10 years expand up to 500,000 ounces a year .They would of course be able to bring in a Goldfields team to build and operate the mine.It is my personal opinion that DEG does not have
this ability.
Just speculation of course but a much more likely scenario than a 10$ Deg share price which would value DEG at 20-25 billion dollars
Might be worth a spec on Gold road as you get a dividend whilst this strategy would play out.
It is interesting to me that DEG has not adjusted its AISC in view of the issues highlighted above ,this will happen of course with the announcement being made on Christmas Day so no one notices.