Ann: June 2020 Production Update, page-13

Hi KKLL,

Thanks again for the detailed layout of the capital.

While we wait for the quarterly report with AIC, updated LOMP (which can’t be far away) and then the prospectus, I’ve been trying to get clear what the base case valuation for the company (assuming gold price on average is $2600 for the coming year and the production numbers are something like the last month) is likely to be and wonder if you or any of the longer term holders have any thoughts now?

The deterioration in operations since 2018 means a lot of the options for the mines (nearby exploration potential etc) have been dropped from presentations. However, going back to then the company (at 30c share price) had a market cap of $130m (down from maybe $180m mid 2018) and an EV of $180m (down from say $220m). The AUD gold price was about $1700 and there seems to have been significant hedging in place at this level. They were projecting AISC of about $1300 over the mine life.

Obviously the production numbers just didn’t happen and all optionality in the company became irrelevant.

Fast forward to today - obviously a lot has changed. As a wild guess, If the AISC/AIC for the LOMP are $1500/$1800, and hedges were locked in at $2600, that would give cash generation still of nearly double what they hoped for back in 2018, and would be supported by actual production numbers for the last quarter.

If all that was right, then the EV could be double the early 2018 valuation, once those same options beyond the short term existing GMZ mining are added back in, to be $500m? If so, after dilution and before consolidation, that would give us a share price of say 16c.

cheers,
pb