full year report fy11, page-7

Hello Reiner001 I enjoy your posts. You ask the hard questions and read between the lines. A big effort post this time from me - I hope it assists in some greater understanding for my friends in here. Get a cup of coffee if you want to proceed.

Development costs are significant and so is the time required. This is part of mining often misunderstood or underestimated. This creates a lag effect across the operations and financials of the business. This also translates into the share price, but only when when sentiment is poor for the sector. When things are positive investors get all excited about future growth if they have confidence in management.

Posts and votes are also affected on HC in negative market phases as people understandably get disappointed when their bottom line is shrinking instead of going up. When the share price is flying the posts here change in character - fair enough but does that impact the operations?

In a massive sell off where people are dumping under stress the true value is not affected at all. Only the share price during the fire sale. Ask yourself if you should sell your house at auction if the house down the street is put under the hammer by the bank and it sells for 20% of its value? Or if cars are being sacrificed at the auctions due to distress selling - do you rush down with your car and auction it too?? The answer is of course not.

I also believe that share price is not reflective of operations or profitability. Two separate things! Therefore you have to understand that share investing is the purchase of undated options on the future prospects of the company and in this case gold itself. You just have to make your moves on your terms and understand the individual business you invest in - most important. That tells you if they are about to go belly up and take your hard earned $ with it or if it will revert to overvaluation at some point and make you richer.

HEADING - CRE

CRE may have has a neg FY last year however I can assess the reasons and some of them are OTC's. (one time costs)
The pits are in good order, prestripped and ready to go.

The high costs caused by low grade delivery to the BGSM can be rectified from new closer higher grade oxide ore supply. A build up of ore stocks afforded by a company with healthy balance sheet can mitigate the weather impact near this mill.

The higher gold price has a positive impact on profitability. The tax losses can be considered an asset if and only if profits are achieved - I think they can due to these reasons.

FML have been constrained by mill capacity and they are in the process of picking up a cheap mill in this deal. I hear it is in great order and moving it is minimal in cost compared to adding new capacity where ever FML decide they want it. Even insitu. This is an optionality like the tax loss and the huge range of prospects in the CRE tenements. If they do not get full ownership the new board can decide to sell the asset to FML at fair market value for a second hand mill and still save a fortune, above and beyond the purchase price of CRE to us all.

FML OPERATIONS
Massive drill campaign is to source higher grade ore to lift production, profitability and share price for us all in the end. BUT it takes time, a lot of which has gone under the bridge already. Results soon to emerge and keep improving the outlook.

The new mines provide this adjacent to the mill and the cost is largely behind us on this. The higher grade supply of ore offsets that low grade stock pile usage and lifts profitability considerably.

Increasing higher grade supply from The Mount provides cash flow to over-ride your concerns about "too thin" as this can be viewed as a production line with RESIDUAL income. This compounds and is amplified by a rising gold price. Again with gold going up, grade going up, higher tonnage of higher grade going up we now have a flexibility not shown in last years FY results at FML as well as CRE.

I could go on and on - beware of looking back at old numbers and production profile to assess current and future conditions for a miner when they are moving as fast as FML are. I have been amazed in the past that the market waited for progress to be proven in old numbers before SP moved LOL - creates value opportunity like that relied on by legends like Mr Buffett.

The market is often wrong, only briefly right like a broken clock - right twice a day! As undervaluation moves to overvaluation it goes straight past fair value.

YES they have to consolidate, we need to see this and deserve ROI for our hard earned $$ invested in FML gold and company options. We want and deserve to see it now please FML Board. They have $$ invested too and want to see this as well, they are on our side! CRE is an additional pipeline project opportunity. TI is the same, new gold camp takes time, longer than I hoped but the picture will emerge.

DYOR&DD
Very best wishes,
CW
(invested and impatient too, but understanding the upside is greater now than it was)
PS great debate by Infose and Ed - and others who added. Gold is going up no matter what and it will lead to overvaluation of all gold stocks in the end. The best you can do is to plan for this time and maximize your opportunity, safely within your own investment risk profile and time horizons.