Ann: June 2018 Quarter Production Update, page-16

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tangs

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09/07/18

16:51

Post #: 34233237
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Originally posted by eshmun ↑

Pretty much the outcome we all expected, $5 million short of the $100 million cash promised. It was always going to be a reliable quarter based on the low strip ratio at the base of the EM stage 2 pit.

Now I think the race will be on to get the developments ready in time. They might be able to increase production at Magnet by displacing lower grade ore with higher grade ore and extend the mine life there through exploration but the company has put itself out there now as a 200koz producer and the market will now use that as a benchmark.

As I said I was disappointed with the grade of the resource at EM and in my honest opinion once Stage 2 at EM is depleted the company will struggle to maintain its 200koz status without major CapEx burn. For me without a higher gold price EM stage 3 open pit is a risk and the UG may not be viable in the long term without another low grade source of ore feed to backfill into the mill to keep mill efficiency up.

My view is that if you want to price the company conservatively for the long run, you can only price it on Magnet + the remaining value at Vivien + whatever they can mine from the base of the EM and satalite pit/s.

I’m still comfortable with having rotated half my RMS holdings into world class mines and development projects in Africa. The cash pile at RMS might just grow a little bit more before reality bites so I hope to make another few cents on my remaining investment but unless they can prove the merits of EM I will be totally rotating out of RMS before the next big CapEx spend kicks in. I don’t want the company robbing Peter (Magnet) to pay Paul (EM). Of course if the gold price booms it might change my thinking. I’d said in a previous post to watch out for sloppy timelines on the EM DFS as a red flag. Esh

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Succinct and nothing I would wish to argue with here and well worth reading and thinking about .
Certainly maintaining EM after stage 2 (and satelites) a challenge .

Just one point though ,if they decide , as both of us hope , not to pursue stage 3 cutback then there will be (less) need for big Cap Ex and they do have a decent sort of war chest !
The company has a good record of making sound decisions and you would hope they would be looking ahead to purchase a suitable project to provide ore for EM mill to supplement whatever they can get underground .

RMS Price at posting: 56.5¢ Sentiment: Buy Disclosure: Held
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