my thoughts

No surprise that GRY have formalised the choice of the initial plant at 2Mtpa. Should run at a good 10-20% over that capacity during the initial oxide-dominant feed period. Presumably they will seek to exploit some the higher grade near surface material during the first2 to 3 years – this seemed to be the scenario envisaged in the 2011 scoping study anyway – to maximise cashflow (eg keep C1 cash costs at this stage below $600). Probably looking at 150-170,000 oz pa if this was the case. All things being equal, I’d reckon they might run the 2Mtpa plant for say 18 months after achieving commercial production before giving the OK to order the extra equipment to take it to 4Mtpa. Under that timeframe, the tie-in of the expanded plant would take place over the 2017-18 dry season. Assuming the 4Mtpa plant runs on a modest grade (1.8g/t), the bigger plant would be then producing maybe 210,000 oz pa. Of course, hopefully further exploration has added some additional reasonable grade ozs by then, enabling the plant to run at 2g/t or more. But that’s way in the future and a lot can happen between then and now...

Bit early to tell what’s going to happen with the heap leach option. I think they are currently testing oxide/transitional/primary across the different host rocks. However, if I took a wild stab and suggested that 30% of the current low-grade Nogbele <0.9g/t halo proved to be economic, this would give 15Mt, enough to support say 2-3 Mtpa operation (yielding say 35-50,000 oz pa). If capital markets are favourable, and permitting is OK, they could raise the maybe extra $25-30 million in the second half of 2013 3 in order to get it in operation at the same time as the CIL operation. There is presumably no reason why some the other deposits couldn’t also be a source of heap leach feed, if its economic to truck it.

GRY will have to raise some equity money sometime in the second half of 2013. I’d hope we could restrict it to no more than 100 million more shares. Don’t know if they might contemplate a TSX listing – maybe if they think they will get a better reception. In any case, I think it’s important that they have some strong results from the regional targets at Banfora (as well as any high value step-out / deeper resource extensions at existing deposits) in the next six-eight months to demonstrate they can continue to grow the economic resource base. Whilst it’s understandable that they have concentrated on the DFS in the last six months, I think their announcements over the last few months has raised expectations (well mine anyway) that Ouahiri, and also Tijeras, results were imminent. We have certainly not seen them, and from my perspective GRY should have been more careful in raising expectations and/or been more forthcoming about the reasons why drill results have not be available or released. However, perhaps GRY is figuring on timing these from later in January to build some momentum in combination with the DFS. Hopefully the DFS will have M+I >0.9 g/t resource at over 3 million oz, and the reserve at over 2 million oz. It is possible they may reduce the cut-off grade for the resource.

angus