Ann: September 2010 Quarterly Report , page-7

Hotfire

I have also sold down, but mostly because I have a margin loan and RSG is not that strong.

The gold price has run too hard for my liking and the AUD is too strong. I am not surprised at the pullback in the POG, and it could go under $1300. I feel that $USD1385 could be some sort of a 2010 top for gold, just like $USD1225 was the top last year in November - just a guess by me. Gold was ready for a pullback but ran on the QE2 announcement. If China tightens its lending (or raises interest rates) then this will be a negative for gold (and lots of other hot assets).

In relation to the quarterly report - it has some good and not so good features, with the increased total cost in the Tanzanian and Australian operations being the bad. Because of the hedge RSG made a loss of $2.5m last quarter so things should be a lot better on this front from here on. In addition, Syama was down for 3 weeks which meant fixed costs had to met while there was no mill work to generate revenue and production was less than it would have been - also average cost per ounce would be a lot higher than it would have been if the mill was operational.

The positive is the end of the hedge, more gold found in Tanzania to extent operations there, and hopefully improvements in the operations at Syama. The low gold recovery rate at Syama of around 70% is a concern for me because a lot of gold is not being recovered by RSG with consequent bottom line profits being missed.

I was talking to an analyst about west African goldies and he said that RSG needs to have some sort of autoclave system for dealing with its sulphide ore rather than the roaster system they now have. The cost for this would be $300-400m. I am not a technical person so I cannot make a judgement on this. Do you (or any one reading my post) have any background on this issue and the extent to which this may be an impediment to RSG's future?

Anyway, a good call yesterday. I think the price could fall lower, but there is considerable institutional support so I am not sure that it will go to $1.00 unless we have a GFC2 type situation or major problems at Syama. I still have some RSG skin on, and I will look to rebuild my exposure.

loki