Ann: King of the Hills set for stronger March Quarter, page-61

Just to reiterate RED's short term issue:
2020 FFS AISC was estimated at $1335 poz
Hedging locked in at average $2160
Margin = $825 poz

Current AISC guidance is estimated at between $1750-$1950, so $1850 average
Initial mandatory hedging still $2160
Margin = $310 poz

$515 per oz more costs = $6.18m less profit per quarter

The above highlights the issue of the current high cost environment.

12koz x $310 = $3.7m profit compared to
12koz x $825 = $9.9m profit for the quarter.
So $19.8m profit in this half year was projected in the FFS and likely profit will be $7.4m.

By doubling hedging across each quarter, the company is protecting their margins until the debt is paid back in 2026. They can now bank on receiving 24koz x $2420 = $58m, less the average estimated AISC of $1850 poz = $44.4m. So $13.6m profit per quarter. $27.2m for the half yearly from 48koz hedged.

RED is forecating 90-105koz for this half year at $1750-$1950 AISC. Using $1850 as AISC and 100koz total production, there's 52koz unhedged to take advantage of the higher gold price. Using current spot price of $2667, profit per ounce is $817 x 52k = $42.4m Add $27.2m from the hedged gold and Red should make $69.6m for this half year.

Interestingly, in the FFS the difference between the AISC and the hedged gold price was $825 poz.

Average guidance now is $1850 and spot is currently $2667, $817 difference.

RED's problems are from the current higher AISC eating in to the mandatory gold hedges from 2 years ago linked to funding and in place until Sept 2026.

A small increase in grade will make a large difference to the bottom line. Just .1gpt extra is another 16koz or $42.6m profit to the bottom line per year. This shows the difficulty of forecasting.

The company will upgrade guidance near the end of June imo, for the next financial year. Everything should be better understood by then.