Dec QTR and 2019, page-2

Your figures are spot on, my estimate is the same. I think December should have seen a 2m operational loss and current quarter should see a 2m positive cashflow. I do expect 1225 realized gold price, not 1260.

Current ops are not as bad as you make them because they have avoided to high grade the deposit and the best ore is still sitting in Smarts 3. But without the cutback and Smarts 4 the current grade is way below reserve grade and costs are higher. I expect a return to sub 900 aisc once the cutback is complete. Essentially there are now two ways going forward. Either concentrate on current ops, stop exploration, get the cutback done asap and return to 800-ish aisc. I think they might make the Investec debt repayment end of March. With considerable risk they will have to postpone it once again. The result 12-18 months down the road will be the plant cannot be fed for a time. Or they go the other road and speed up exploration. In that case the Investec debt cannot be repaid from operational cashflow and Investec will be hesitant to renegotiate because why would Investec let cash go into exploration funding when it could be used to pay down debt? So the SPP needs to be large enough to pay the Investec debt. That will avoid a lot of risk in the short-term and ensure there is no mill downtime 18 months down the road. The downside is there will be more shares issued at a price way below fair value. I very much prefer going down the second road. I am happy to lose maybe 15% of my relative stake when every indication is the new deposit is going to be a multiple in size and grade compared to current reserves. Also a SPP favors smaller shareholders compared to larger shareholders, a fact I happily accept. Better small shareholders get the relative benefit than institutional shareholders or banks.

Hopefully we will get new drill results soon, maybe there will be no question which road to take.