Gold and macro environment, page-431

Simon has stated he wants to go into production with a 10 year mine life. They will most likely achieve that once Pepper is drilled out by end of this year (except the upper part of Pepper) with NN and Pepper MRE probably being 2.5m Oz with a potential reserve of 1.5m to 1.75m Oz). That will give them 200k Oz to 250k oz pa for 10 years. If Pepper further assays continue to show results similar to past results I an expecting Pepper grade to be higher than NN (which is already 9g/t) and a Pepper grade of 10/11g/t is possible. Pepper grade inferred is less than 8g/t so 10 g/t is a minimum of 30% higher and 40% higher at 11g/t than the current inferred grade. That would increase the current inferred Pepper MRE up to over 500K oz and over 600K oz and then if they expand the area of mineralisation by 50% to 100% they may get to over 800k Oz and maybe even close to 1m oz

With a PFS or even a DFS (it has stated it may be a DFS) before June 2025 (I note one broker suggested Q1 and that may be possible given the mine plan work they have publicly shown) with a FID by June it seems possible SPR may be in production by mid-2026. They will need to employ a mining contractor, make changes to the plant, build a paste plant, etc. All that may take up to a year from FID.

2027 seems odd based on what Simon has stated publicly and to me at the August conference - just another example of how poor their analysis has been. A 2027 start assumes they do not make an FID until early to mid 2026 or later - even if they decide to drill out the upper part of Pepper from UG before an FID I expect them to be in production by mid 2026 maybe Q3 2026.

My estimates of NPV @10% discount rate and ratio of NPV to Cap ex is in the table below. (Not quite sure why it would take $300m or even $200m to get into production given they have a plant (but needs changes) and a drill drive and other infrastructure in place (they need a past plant and mining machinery unless they use a contractor to do the mining, etc).

The NPV/cap ex ratio is very high. At current spot gold price of almost $A4,000 at an AISC of $A1,500 (maybe too high) the NPV at 250k Oz pa production (my expectation with a NN/Pepper MRE of about 2.5m Oz or higher) is $A3.2b and $A4.5b at an AISC of $A1,200. The IRR is off the scale ie hundreds of %. A FS using a $A3,000 POG seems quite a pessimistic POG but around $A3,500 seems more sensible.