wilson's assumptions - are they valid?, page-13

Buzzly,

I suggested 7% as a discount rate since the mine is already built, in production, and realizing excellent concentrate grades - especially considering the low grade ore initially processed. Most of the project risk is now eliminated and there is little country-risk. In my opinion, WACC is only relevant to the internal pipeline investment decision and even then it needs to be adjusted up or down for the project's specific risks, but that's just my view.

When we look seriously at making an acquisition in the competitive market, we use a discount rate of 5% for US, Australia, Canada, and the few other low-risk jurisdictions. Then we assume a 40% premium over the resulting NAV to arrive at a reasonable offer price. I think anyone looking to buy HIllgrove would be using similar criteria, so 7% might even be a bit conservative from an M&A perspective.

I really do have to say that the development of the project under Drew's leadership has gone remarkably well. Even an experienced major producer would be fortunate to have things go this smoothly and within budgeted time and expense. All of my fears in that regard are now gone. JOB WELL DONE!

Now just stay focused on the near-term lowest-risk opportunities until sufficient cash flow has been generated to consider other riskier growth opportunities.