high costs - and how fml might become viable, page-3

morning,

thanks for the post alex, a couple of points


"2. Expand production @ much lower unit cost (do not seem to be able to do this)"


fml believes they are able to do this - in fact that is what this massive drilling campaign is all about - prove up massive resources and reserves in 12 months.

Once they have a handle on how big the processing plants can be - economically - then they will expand both coolgardie (my guess by more than one means) and also Laverton - certainly by getting Barnicoat going - ? maybe other possibilities as well. My guess is they are shooting for costs between $800 and $900.


"3. Price of gold rises significantly and stays there, e.g. $2,000 plus"

Commodity price of gold is not unlike any other commodity - be it oil or wheat or whatever.

If the price dropped markedly then not only fml would be in deep doo doo, but so would most of the gold industry world wide.
Globally gold mining costs are heading north and are over $1000 on average from memory. We won't even mention sovereign risk.

I cannot see the pog taking a long spell under the price of production ------------ how can any commodity do that.

So is it a risk for fml? - Yes, but a risk of change of operation - not now a risk of disaster imo..

POG going up and staying there ------ wouldn't that be lovely, especially in Aussie.


"4. Major new high grade / low cost discovery "

Well, we have to be in with a chance on that one eh?



"But cash is being rapidly spent away, so better hope for pog rise or some great drilling results. Otherwise may not be long before sp trading down towards (falling) cash backing."

imo fml is now derisked massively - it has a large cash holding and a backer who has access to huge funds and a want to be successful.

The risk is really the pog ----------- but, with such a backing and cash - if the pog did collapse - then fml could stop production altogether if necessary and still continue to explore.

Like I said before, I cannot see the pog going south of the cost of prod. - at least for long - that is not possible.

What I hope is that we have rapid resource and reserve growth as planned - so that we can rapidly advance production plans ------------- AND execution - that is the key.

Luckily so far over the last years fml HAS been good and fast at that - once they decide to do something - they bloody well do it -- getting 3 mile up a good example.
Should be ditto for expansion of coolgardie and should be the same for Barnicoat.

If only we had the same control over the weather and getting bogged in salt lakes :) - that would make me very happy.

have a great day

Pinto