Ann: 2016 Full Year Results Summary and Investor Update-DRM.AX, page-66

Hi Timbin4,

I'm just trying to understand why the market is selling DRM down, and for me there is a number of reasons;

I put my trust in management also initially, essentially everyone has however it seems they may have bitten of more than they can chew at this stage, i am sure they will get their heads around it, but when?

Sure they can stop drilling and not spend the $15m, that will just mean they don't add resource to Andy well for FY18 and it produces again at $1300-1400, Deflector doesn't expand resources, the JV's they have committed to spending a small amount for their earn in, sure not ideal to not spend the $15m, but can be done? If they can't drill from cutting their budget there certainly won't be a 3rd mine soon, in fact i noticed they had removed that from the recent report and rightly so, they have dropped the ball with Andy, and Deflector is proving difficulties, obviously a 3rd mine is a looooong way off!!

As for CR i would think not, however lets not forget last quarter AISC was $1548 for 16K/oz at average POG $1579? So to much cash generated last quarter from Andy? This quarter as much as i hate to say it i think Andy AISC will be $1400 range and might come down to $1300 over second half of the year? (To be honest their cost cutting implemented here hasn't really cut costs)

As for Deflector its really hard to know the fact is they are meant to be producing at 83% recoveries as per BFS around 5,000 ounces per month combined to reach 60,000 ounces p.a.

Understandably May, June and July were slow at 500,1,500 and 1,800 ounces, and Aug at 2,900 gives them total of around 6,700 ounces combined to date? I know the plant is ramping up but August is 4th month and whifley table has been installed to improve recoveries but hasn't yet done the job to BFS levels..

When a company forecast AISC of $787 targeting 5,000 ounce per month what happens when there is 6,900 ounces over 3 months? I would presume that AISC could be double so $1500-$1600 and thats being conservative..

The fact is in Aug their pouring the same costs as in full production, yet only to recover half the gold, the stuff that makes the $$....

It may appear that Sept may be better month for Deflector, hopefully they can recover the extra 2,100 ounces and achieve commercial production...

If they don't well we have another quarter of no earnings, or extremely minimal, if Deflector AISC is higher well no earnings and could in fact be costing us?

I didn't invest in DRM to earn NO $$ for 6 months, and with limited cash being earn't for this period, that $40m cash will be dwindling as DRM has $80m debt commitment...

The problem is that there is 10 months in the FY17 left and on the lowest side of their guidance is expecting Deflector to contribute 35,000 ounces overall, you take the 6,700 ounces already delivered from that, leaves 28, 300 divide that by 10 months equals 2,830 per month which is exactly what the month of August has delivered at 50% recoveries? So their looking at Aug and saying this is worst case scenario?

So whilst i feel that they want and hope to improve recoveries moving forward, they have also covered themselves by saying were not really sure and 105k/oz from 2 mines could be it?

Now i feel come Dec/Jan once milling the UG ore, things may change for better, but nothing is guaranteed and hopefully they will pick up slack and make up for first 6 months...But this is still 4 months away..

However until we get commercial production announced (earliest end Sept) in my view they are operating 2 mines that are potentially not making money given their hedge commitments, what is a company worth that has 2 uneconomical mines in operation and $80m debt?

I have been as positive as anyone, keen to enter a little early trust in management were right for the job, just seems a combination of a few things right now for example, if the 50% hedge was not so low, or Andy AISC so high could help offset this period for Deflector a little more and not restrict their cash flow so much...

Happy to sit on the sidelines whilst the market decides valuation, and our seller finishes, some how i can't imagine HH being overly excited about the out look...