Ann: September 2016 Quarterly Activities Report-RMS.AX, page-47

Hi Sam.

Your ASIC table was missing a few comparable companies I also invest in, and I also wanted to show the importance of the hedging and sales price, as well as a few interesting measures of value showing where I think the true investment case for RMS is, all based on the latest quarterly

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12
1		A$	Cash	A$	ASIC	koz	Net $M	FCashFlow	EV /	Years/	FY17%	$
2	Code	AISC	Costs	RecieveGold	Margin	Prod	Cashflow	/EV	Res	Rsv	Hedge	Hedge
3	KCN	$754	$653	$1,690	$935	39	$793	236%	$5	14.4
4	SBM	$935	$763	$1,737	$802	93	$1,830	21%	$146	10.9	28%	US$ 1299
5	RMS	$915	$691	$1,661	$746	36	$951	80%	$62	3.6	55%	$1,599
6	RED	$1,035	$650	$1,778	$743	17	$1,052	37%	$48	11.7	0%
7	EVN	$1,060	$753	$1,708	$648	205	$1,265	11%	$238	8.3	30%	$1,584
8	NST	$1,091		$1,720	$629	110	$1,201	4%	$232	3.4	32%	$1,689
9	RSG	$1,173	$1,004	$1,790	$617	79	$1,252	26%	$62	19.1	11%	$1,800

KCN is an anomaly since they are being closed down they have cut all development capex. You can see RMS is still good but as has been pointed is about $100 inflated by the extra sales from previous quarter, and let down by their received gold price due to heavy hedging. Given their 50% hedging, if gold goes up A$200 due to gold rising or AUD falling, they only see $100 increase in margin compared to unhedged or $140 for 30% hedged. I think the currency risk is particularly pertinent. Given that, RMS would fall to the bottom of the table on margin, although these are miners I picked a couple of years ago for potential cost cutting while unloved.

On the value side, look at the Net CashFlow based on change in quarterly cash balance accounting for dividends, inventory, working capital and new developments, by my own calculations then x4 for annual % of Enterprise value. This shows a lot of potential revaluation if it is maintained, and it is consistently at about 40% for high risk and micos like RMS and RED, more like 20% for established like SBM and 10% for the bigger favourites NST EVN. Same value shown in the EV per resource. RMS shows resource and reserve life risk, also single mine, but ok country risk, they are also doing some major development which could blow out, all a bit unknown for a micro cap, hence the hesitation on the market maybe (which is also generally bearish)

I really wanted to just clear up this ASIC vs margin argument. I do see some value and upside still, but would look to sell down much of my oversize position when these numbers line up better maybe somewhere above 60c, because I think their next quarter or 2 will struggle and if the price of AUD gold goes up they will loose compared to lower hedged producers and drop in relative value. When there is further certainty in the long term gold and what RMS intends to do with cash I will decide if RMS is a long term goldie hold or not.

Please do your own numbers mine are subject to errors and expectations.