Ann: RIU Conference Presentation, page-68

Hi Curiouswon. It's about time you had a big win in this space.

Hedging:

Hedging certainly saved the day during the near death experience back in the middle of 2016 when the copper price crashed to us $1.90 and the Institutions who funded the open pit were leaving the building with great haste and on the way out smashed the SP down to 2.8c.

The hedge book at that time had a walk away value of $13m which was enough to get rid of the debt and all the dire consequences of a lender, whose only concern is getting their money back quickly, taking control of the companies destiny.

The problems were of course much bigger than the debt burden.

Getting rid of the debt was just the first step in a tortuous journey.

Discovering that free cash flow from operations is not the whole picture:

I was on a steep learning curve back then and was surprised to discover that while HGO could generate free cash flow from operations at $1.90 a lb. that was far from enough even with the aid of the hedging to keep the lender at bay because of the debt servicing obligations and the ongoing capital expenditure needed to fund the cut back of the open pit.

HGO's open pit experience:

You will recall that the capital raised from a Convertible notes issue with attaching 3c per share options finally saved the day. That was, like all capital raisings, supported by a valuation spread sheet that forecast a mining cost per tonne of ore based, not on an informed estimate of what the job ahead entailed, but rather a look back at what the much easier job that had just been completed had cost. As the base of the pit got smaller the two machines that had been contracted didn't have enough room to work so one was put out to pasture doing rehabilitation work that could well have waited and the mining operations efficiency level dropped. The mining cost / tonne chewed up the lions share of the expected free cash flow and MD Steve tried to save the day by selling the pit to AGL.

HGO's underground experience:

Could the recent appointment of Rob Fulker be a sign that the board are on the same wavelength as you in this regard. A wealth of experience coming on board in a few days time.

Open Pit verses UG :

The near death problems back in 2016 were compounded by the fact that management were stuck with an inflexible mine plan. When you start on an open pit mine plan you are virtually stuck with it.

An underground mine plan as we have been discussing at some length is infinitely variable as the cu price changes. If the price rises you can drop the cut off grade and mine a bigger quantity of profitable ore. If the price drops you can lift the cut off grade and mine only higher grade profitable ore.

Investing in UG mines managed by folks who are highly experienced in UG in the future seems like a good investment plan.