Mark 2 a basic lesson in mining 101. The value of KAL's in situe...

Mark 2 a basic lesson in mining 101. The value of KAL's in situe ozes depends on their "quality" that is the probability of producing economic ozes from them, which depends on grade,strip ratio, number of ounces etc. The principle driver is grade which in this case is low, followed by the number of ounces and then strip ratio. Of course there are a number of other factors which come into play as the confidence in the resource is increased with drilling and testing. In this case because the grade is on the low side to say the least then you need to find the lowest possible costs and in order to make a low value ore economic is by having enough accessible tonnes to drive a large scale processing plant to keep the unit costs down, if you are lucky enough that the strip ratio is low as well. Therefore it follows if you do your homework that there is nothing near Norseman that has the throughput to treat this low grade material so therefore they will have to build a standalone plant with a capacity to treat 1.5-2my tonne/annum. Capital costs likely to be 100my+ with a 3 year lead time. If one was to put a value at this time on the "in-situe" resource because of the quality of the ozes due to its grade the number would be in the range of $5-15/oz which makes the resource worth 7-21my. At this point in time given the knowlegde the company has released to the market it would appear the company is well and truly over valued. On a technical side we have a 53%increase based on only 1600 RC meters, and normally one would like to see some diamond core work especially for SG determinations which have such a dramatic effect on the number of tonnes which reflects in the dramatic increase in ozes.