Ann: Company Update, page-10

EXG shareholders ... I have refrained form commenting on some of these posts as they do not seem to reflect an understanding of exactly what is going on here. For the record I have been a long term shareholder of EXG and have been in them since 2012. My entry price is more than double the current share price but I am very happy with what they have and what their potential is. Like most juniors, and especially those that have not got to the production stage, they have been caned in this god awful bear market.

Some background for those of you that may have not been closely following what this company has been doing. First, we have known for at least 2-3 months that they were required to raise capital. It was a condition of the funding that they received from Macquarie months ago. Second, the initial funding requirement, when they had to stump up $12.5 million for their contribution to the capital for the upgrade of the Norton Paddington mill was massive and far more concerning than what they now have to do. They have done amazingly well with their recent treatment deal with Norton's to effectively eliminate the need for the mill upgrade capital requirement of $12.5 million and so they only now need to raise sufficient cash to meet their revised obligations through the Macquarie funding deal and to get into production.

The managers of this company are very conservative. I have a geology background and I sometimes get a little frustrated about their conservatism but, in these tight times, as you move from explorer to producer their approach has paid dividends. They have now stitched up a 5 year treatment deal with Norton with the option to renew for a further 5 years. They have a massive exploration upside and whilst they have only declared a resource of around 1.3 million ounces they are probably sitting on a major mineral camp. If you look at the immediate vicinity they historic production is in the 2-5 million oz range. As a geo, I reckon that they probably could be in that range of total resources as you have to remember that they have only drill a fraction of the prospects that they have and even those that they have drilled are open at depth.

The short term production figures and the all in sustaining costs that they quote are VERY conservative and it would not surprise me to see them producing plus 50,000 ozs within a year or two, with a margin of $400-500 an oz. That may not sound much but with less than 500 million shares on issue (and even after the current capital raise where they are probably only after $3 million to get into production they will have less than 540 million shares) and with a gross annual profit of around $20-25 million, that represent an EPS of 4-5c a share. With a conservative PE ratio of 4-5 then you are looking at a valuation of 16-25 c a share, and that does not take into account their massive exploration upside and the very high probability of a significant increase in resources in a short period.

I think that this company has delivered big time to get to the point of production and once production commences in the next couple of months and they are cash flow positive I think that the market will finally wake up to just what a little sleeper this one is. One last point, Norton is probably desperate for soft higher grade ore (which is what EXG has) and now that it looks like Norton has lost out to EVN for Phoenix, I have a gut feel that EXG becomes critical for Norton's long term strategy and to some extent will be in the drivers seat on a range of matters, especially with the large resource that they have which is only 20km from the Paddington mill.