revisiting, page-13

I have to disagree again.

First off, with the management. Now, what would have a new feasibility study accomplished? I guarantee you, that a new feasibility study would have indicated that the project should go ahead. Not only did capital costs escalate, BUT, so did commodity prices - so the economics would still be robust enough of to proceed. Thus, you just paid for a new feasibility study to get you no further ahead. You still need financing, and the project should proceed if you get it. As for the capital costs, EVERY single major project (me being from Alberta - I saw every oilsands project have to escalate their projects, which ranged from $1 billion to $10 billion in size). OGC found out what the escalating capital costs were, and then made a decision to begin looking for financing, JV, or even a sale I imagine. Good management, unfortunate inflationary environment.

As an example, Teck Cominco's CEO Lindsay was considered the cat's whiskers, and when Teck acquired Fording Coal, he was touted as such a great businessman. Half a year later, they want his head - coal price collapsed, and Teck took on a lot of debt to do the deal and now the company is in a lot of trouble.

Thus, I feel that one needs to assess management's ability in how they rectify this situation. Yes, credit markets were one of the biggest hurdles. In a better environment, they get the financing and proceed (albeit as a highly leveraged and risky company). And yes, in a better credit environment, they would have received the funds....I guarantee you that, speaking from someone who has worked in banking.

As for other gold companies and their projects - any company who developed projects in the last couple of years faced great escalating costs. The only ones that did new feasibility studies are those that were concerned that perhaps the project might be uneconomical. And, many, many gold companies used the equity route to finance their projects, meaning high levels of dilution. This was criticized at the time by many, but now in retrospect, appears to have been a lifeline, as those that did use debt are in a tougher position. What OGC did at the time was ambitious, and now they have to sort out the problem in the current macroeconomic climate.

As for cash flow - no, I disagree. Operating cash flow is the defacto metric for commodity companies. I am not saying that overall cashflow isn't important, because of course it is, but operating cash flow gives you a picture of efficiency and profitability of operations. If a company is cutting back on CAPEX at the expense of future operating cash flow - then overall cash flow can give a distorted picture.

As for NZD and USD - there is an implicit hedge so to speak. For example, NZD dollar drops, operating costs in US dollars decline and gold sales reported in US dollars also drops, and vice versa. Frankly, reporting in the NZD does make sense insofar as the gold is sold at NZD spot price and a lot of the costs are paid in USD. But, for comparability purposes (one of the hallmarks of financial statements) US dollars makes more sense. And because all commodities are priced in US dollars, it also makes sense to report in US dollars. Yes, the exchange rate fluctuations can make analysis a little more complex, but ultimately, a picture is better if it is in the world's reserve currency. I do agree, it is the NZD gold price that does count, but when gold goes up do to fundamentals, it goes up in all currencies. There are of course exceptions.

Dipidio is NOT the sole reason of the drop. Highly leveraged producers, and those with hedges, have been hammered hard. And, as I stated Ospyraie has sold like a maniac - they were liquidating and they held a lot of OGC. This hurt as well. And, if it is Dipidio that is the sole reason, then that is an even greater buy signal, as the mines in NZ are basically being ignored.