Ann: June 2016 Quarterly Activities Report-TGS.AX, page-26

Nice Leec. I would just add that in addition to the reduced AISC, they will also see a larger overall net profit number which will help with debt. That sounds obvious (and perhaps it is) but it's easy to get lost thinking about profit in $ per lb produced terms and not the overall number. Thinking about this another way, it's better to produce 10,000,000 lb at 1c net margin is better than 1,000 lb at $1 margin all else being equal.

My humble view is that it's better to grow the business, even if it increases their AISC as long as it makes economic sense to do so. Growth = $ which seeds more growth. My expectation is they make more money from the expansion (obvious), which they can use to pay debt faster, thus reclaiming equity back in the project faster. This reclaimed equity can then be used as a basis for taking new debt to fund "phase 2" expansion to 64kt. The more debt they pay down, the more equity they claim back, the more the SP should resolve itself (assuming they can replenish the resource). If it doesn't, I'd be agitating for a buy-back.

The last point is that as the business grows, you become less sensitive to total production and more sensitive to the price of the commodity. Right now it's the other way around, so their AISC went up a lot because of the fines issue from Pad 5-1. Diversified production from different pads and the impact from 5-1 as a percentage of copper produced would have been smaller overall, leading to smaller movements in AISC and impact to net profit (as a percentage) would have been smaller.