I am pretty pleased about how the KotH FFS turned out. Very...

I am pretty pleased about how the KotH FFS turned out. Very promising going into the future. Comparing to my March report about the company taking into account the PFS, I notice the following changes:

- Mine production has increased from around 140koz p.a. over the life of mine to 176koz p.a. for the first 6 years and 146koz p.a. over the life of the mine. This is very encouraging conditional that it does turn out to be. I always say it is good to count the eggs but don't bank on it too hard until they hatch.

- The cost of the mine construction increased slightly from $218m to $226m. That's fine, I do not mind if the mine construction to be around $250m by the time it is all said and done accounting for inflation as a result of the central banks and governments worldwide stimulus. Gold price has gone up by a substantial amount the last 18 months if that is an indicator of what is happening.

- The mine reserves have increased from 1.49Moz to 2.38Moz, a very pleasing result. This underpins a potential 16 year mine life that is very compelling.

- AISC expected to be $1 339/oz in the first 6 years with higher production and $1 415/oz over the mine life. This is more realistic an estimate to the $1 167/oz in the PFS. I would expect it to be around this, it is not an unpleasant surprise. Would have been dismayed if they kept the previous estimate.

There's more that I have skimmed but have not included in this post.

That being said, while it all spells very rosy for RED, I am not going to get all excited and jump in hard expecting the price to go to $1 by year end. If it does, happy to be wrong but I would expect that to come off the back of an improvement in the operations at Darlot rather than because of KotH. The mine will begin production in the June quarter 2022 according to management. Regardless of what some fans of this company say, I expect the company to trade fairly at around the 45-50c mark, implying a market capitalisation of around $800-900m. The company is producing around 90-100koz p.a. at a pretty high AISC of $1800-2000/oz right now and expected to be at this rate till early 2022.

Backing my views are the fact that I had expected the stock to trade around 20-35c range the last 12 months (pretty much did), I called for an equity raising early in 2019 about the KotH mine construction (it did), and that the AISC should be higher at $1 375/oz instead of $1 167/oz (which the company has since adjusted). Some of my views went against the views of several equity analysts and posters alike.

Anyway, this ship is a good one but it is not due to sail fast until they fix up Darlot and get under way with the construction. When it does cruise with the KotH producing, it is a company producing around 270koz p.a. at AISC of around $1 500/oz so it would be fair to say that the market cap can be around $1.8-2.5 billion if we consider similar peers like SLR, RMS (albeit RED has more reserves).

Exciting times ahead.

Cheers,
Brian