ducks guts

1) Supposed ‘improved’ production
Just one look at the graphs RED has released makes me want to be sick. They neglected to inform us that in the corresponding March qtr in 2012 they moved 1,000,000bcm in higher rainfall conditions and with only one (substandard) contractor. With two earthmoving fleets on site and ‘better’ management they got a measly 429,000bcm. Why? Blamed the rain in January but March was a relatively dry month so course the graph looks good… for March. They should be getting at least 1.5 million bcm a quarter based on their previous performance when they were still dewatering the pit in what must have been awful conditions! No excuses now…. the mud has been removed from the bottom of the pit since mid to late October 2012!


2) The dewatering/water management hype
This latest ‘news’ on the dewatering is a ‘red herring’ designed to keep us ‘informed’. The Co has made such a big deal about this but have neglected to mention they already have 5 other dewatering bores in operation. This ‘new’ approach doesn’t make sense since these bores can’t remove water from the pit from rainfall…. it doesn’t work that way in all mines. Perimeter bores only mitigate against additional water inflows from aquifers at or above the level of mining and their efficiency will be lower (and therefore more expensive) than that of in-pit pumping. Only in the driest conditions like in Oz would anyone try to draw down the “dewatering cone” from perimeter bores alone. And the water table at the mine must be almost at the surface as it is in most of the tropics! Look at it another way… the Co removed a conservative 18 to 20 billion litres of water to get this mine started (about twice the water consumption of the City of Sydney in a year)…. makes sense to me IMO that the system worked previously…. why mess with it. I’m sure this will be ‘news’ for a long time to come.


3) The supposed gold recovery improvements from the processing plant
The Co has previously provided the figures to calculate this ‘fixed tail grade’ they mention. In fact they should have averaged 80.4% gold recovery in the last qtr based on their previous reports. The ‘fixed tail grade’ works out to 0.49 grammes per ton and this figure matches all their production forecasts previously reported. The Sept 2012 qtr recovery figures are spot on but since then they have lost at least 900oz of gold. That’s not an improvement! If this continues we will lose about $7+ million of revenue each year based on current prices.







4) The March quarterly indicates they are spending much more and achieving much less.
The June and Sept 2012 quarterly mining costs were inflated probably due to the removal of the mud at the bottom of the pit over that six month period. The Co stated they wound back mining in line with the revenue stream at the time. Makes sense and IMO I’m glad they did it despite much of the costs being the fixed costs of just maintaining the mine. Despite the higher costs during this period ($8.82/bcm) they now have an embarrassing $10.49/bcm mining cost in the last quarter….. free of the mud, two mining fleets to them, considerably better weather that the previous corresponding quarter and what WAS a healthy bank balance. Looks like this mine is destined for a much higher cost! Look out for another requirement for funding!

5) Timing of asx reports
I left this little gem until last. While researching this Co I found their presentation to the Wilsons HTM Rapid Insights Conference in Sydney and reported to the ASX n 22 November 2012. Interested in what other Co’s attended (PAN & SDM amongst others) I have discovered (and confirmed through Wilsons) that the presentation was given on 12 November 2012 a full 10 days before it was released to the ASX by RED. From the opening on the 12/11/12 ($1.38) to the closing on the 22/11/12 ($0.94) RED lost 32% on the sp and more than 6 million shares were traded. In other words some people were lucky enough to be insiders while the sp dropped around our ears! And IMO I can’t be sure this delay in information is not happening right now! Strange, alarming and needs more analysis.


I will be researching into the experience and background of the management and directors of this Co since things don’t seem right.