Ann: Dec 2008 Quarterly Activities Report , page-31

Neil,

You have a good point about the payables, but I have two further observations, one which works for MCR, the other against.

Firstly I don't think it is fair to compare hedge book at face value to cash in the bank. Hedge book NPV (or close out value if you prefer) will be at a discount to face value. Also it will add to profit and therefore be taxed at 30%. I suspect fair comparable value to cash would be at 60 to 65% of face value.

Secondly imo the differential cost margin is equally as valuable as the hedge book (provided operations continue). If PAN costs are A$70c/lb lower on 20mm payable lb pa, thats A$14mm pa pretax. Apply say a 5 year multiple to that, that is a $70mm advantage to PAN, say A$45mm NPV after tax. Even if you only applied a modest 3 year multiple A$26mm.

I would however say that a comparison of more than one quarter would be required before relying on a sustainable cost differential!!

I remain ambivalent about the merits of MCR over PAN, or vice versa. In fact I am yet to be convinced, or to convince myself that either are actually better value than IGO at current prices. Will be giving these questions great attention as IGO has crept too close to half my portfolio value to remain unsure.

EL