Ann: Corporate Update, page-101

I am beginning to wonder if quite a bit of smoke and daggers theatricals are in play. Kingsgate seeks permission for the super pit, making a bit of a song and dance about it even though as you say it is not that important. As part of a settlement, the Thais give the green light. Similarly, they agree to a reduction in the royalty rate for gold.

Everything looks rosy. Management looks good as they have won concessions, major even, and the Thais look like they are happy to right the wrongs of the past.

I assume that the area north of the road, demarcated by the purple line is reasonably highly prospective as it would form a fairly big chunk of a super pit. Would it make economic sense to establish a smallish separate pit to mine in that area?

Is the green line a secondary road?

I am not sure I fully understand your reasoning if the gold price remains high.

“High gold - if it stays high, and profit is excessive and starts to accumulate (even after high royalties), they'll consider expanding/modifying the plant. That would require ore in bulk, but may make slightly lower grades profitable. So needing new ore, but not desperately.”

Surely, modifying plant is always a consideration if the benefit justifies the cost, even more so if the gold price is languishing. Moreover, I would have assumed plant already has been modified as much as possible, especially the old plant. Hence, there will be no need to make further significant modifications for years to come. They have already been made.

Are you expecting the recovery rate to have improved(compared to the past) significantly?

If the gold price is high and it becomes profitable to mine ore that previously was not, why expand the plant’s capacity? I can understand that decision only would be made if there is a lot more lower grade ore that could be profitably mined at higher gold prices. If not, then would it not make sense to keep plant capacity stable and continue for as long as possible to mine profitably? Moreover, the longer the mine continues to operate, the more opportunity time there is to find new economic deposits.

You note that in “an updated JORC statement the Proved/Probable reserves are the bits we are quite confident exist.” It is the probable side that worries me. In the gold mining industry in Australia, on average, how closely does reality, actual mining of those reserves, tend to match theory, the reserves that have been classified as such? In other words, are we talking about an extremely high percentage rate of success in defining reserves that fall into that category?