wow, page-20

Hi Guys,

Even though I am actively buying I can't resist talking up DRA assets.

Following on from Gluttens excellent post regarding the cash flow for the coming Quarter and subsequent cash position I have been looking at DRA's asset position.

We all know that DRA is generating large free cashflows at present, will produce an excellent FY10 profit result and is (post Sept 09) presenting a very low PE value.

But what of its asset base? How long could DRA keep producing?.... and after all that is the second key component in valuing a mining operation.

ENTERPRISE VALUE

Using Gluttens analysis we can expect that by the end of the March Quarter, DRA will be sitting on somewhere between $19 - $24 million AUD in cash, bullion or cash equivalents.

From this we must remove about $13 million in liabilities - mainly the convertible notes.

So the net cash position will be somewhere between $6 - $11m.

Thus the EV is approx the Market cap; $63m less 6-11m = $52-57 million AUD.

For that we get:

SVARTLIDEN

This has a current JORC of 155k oz*

*(Latest Presentation contradicts itself on page 9 it says resource is 176.4k oz (105k + 71.4k) but on slide 32 states 155.9k oz - I have used the smaller number).

There is excellent exploration targets surrounding the existing mine and management expect that this will yield a further 340k oz of reserve.

VAMMALA

This HAD a current JORC of 578koz as at the last Q Report.

Since that time a further 43k oz have been JORCed and the following drill intersections have also been lodged:

28m @ 6.03 g/t
28m @ 6.81 g/t
23m @ 12.0 g/t

Management expects that an additional 300k oz will be JORCed from the VAMMALA system (incorporating Orivesi, Jokisiva and Kaapelinkulma). DRA is well on the way to achieving this management estimate.

KUUSAMO

Currently has a JORC of 178k oz.

This could be the next production center for DRA and with the number of additional prospects in the tenements this 178k oz is likely to go much, much higher over time.

HANHIMAA

Located in the very Northern parts of Finland this has excellent exploration potential with a 20km strike length encompassing world class prospects (3) and numerous gold anomalies

ZARA

This is a free carried position DRA has in an Eritrean discovery. DRA's 20% interest gives them 188k oz JORC resource.

However,

DRA has signed an Option with CHN allowing CHN to buy DRA out of this project at between $8.8m - $16.2m AUD. Thus, depending upon what CHN do by the 30th June 2010 this will either be a gold asset for DRA or cash in the bank at the rate of between $46.80 - $86.17 per oz.

WELD RANGE

A collection of tenements in Australia that will likely be spun out of DRA sometime soon.

MINE INFRASTRUCTURE/ DEVELOPMENT

$8m of plant and property; $28m of capitalised exploration (recognised in JORC resource) and $7m in capitalised development.

TOTAL

DRA thus has a current JORC gold resource of 1.142m oz

Mgmt exploration expectations + 597k oz

Doesn't include upside from KUUSAMO or HANHIMAA

But,

188k oz of this JORC resource could be monetized in the ST from ZARRA, increasing the cash balance $8.8 - $16.2m, so possible outcome:

Cash + $8.8-$16.2m and JORC of 954k oz + 597k oz + upside

JORC + EXPECTATIONs/ EV

Including ZARRA oz at this stage (and reasonable mgmt ST exploration success estimates) provides the following:

EV $52-$57 million
_______________

1.142m oz + 597k oz

Equals $29.90 - $32.77 per oz

This is very good value for money from an operation currently producing 70k oz pa, unhedged and ramping production up to 100k oz within 2 years.

On all metrics DRA is exceptional value.

STRATEGY

This is clearly to focus on Scandinavian production and exploration efforts building both the resource base and the number of mines in production

CORPORATE

The SP is obviously not reflecting the value of DRA. There are many theories for this.

Corporate activity may not be far away given the accumulation by EUG that we've seen lately.

It may be worthwhile for all us smaller holders (and some of us larger holders) to keep in contact via HC just in case a low ball offer does come through.

As can be seen from the AAM threads, combining all HCer's holdings can actually add up to a large % of a company's total shares on issue.

You never know, combining all our holdings into a sizable block at some point in the future may be an interesting thought if corporate activity does eventuate at a give-away price that we are unhappy about.

Just thoughts

Cheers
John