here we go, page-34

Vector

For some background I've worked/ work directly in the financial markets for almost 15 years. The forward curve is merely a representation today of prices in the future, yes you could use them today to hedge your gold production against but as a gold company you wouldn't want to run a 100% hedge unless you are sure that prices will fall and you want to maintain your margin. A 100% hedge also puts significant production risk on the project and failure to meet your hedge obligations (i.e. selling a specific amount of gold back to the hedger) you could potentially go broke.

It isn't the industry "norm" to use a forward curve for valuations, what the industry actually does is make assessments of their on and use their own price forecasts to value a project. Please look at any valuations from Goldmans/ BoA/ ML/ Morgan Stanley (I have them sitting in front of me right now). You can also use the CPF function in Bloomberg to see all the analysts forecasts of where they think gold will be in the future - This is a much better representative rate than a forward curve.

A bank when it comes to finance won't be using a straight forward curve when they work out potential cash flows, they will be using their own pricing forecasts (this I know from having these actual meetings).

I agree with you that DCF valuations have a higher weighting attributed to earlier cash flows but I disagree if you think that 2018 on wards will have limited impact on the valuation. The first few years "aren't" hedged... only 50,000 ounces are.. i.e. equivalent of 1yr production.

b) The discount rate I agree isn't the interest rate they will receive, it is used in this sense to value the risk attributable to the project and its potential for the project to deliver on what its promised, In what I do it comes up all the time and is part of constant discussion in our offices.

When I say its the cost of funds that the banks will lend these guys, I am meaning to say its the RISK they are comfortable in taking on to lend them money... its not an interest rate on a loan.

When an investment company/ fund manager/ private equity group looks at "investing" funds into companies, they look at the risks of getting a return and hopefully their money back a small cap resource gold company using a $1700 gold price is "risky" and if you think 8% is a good return on small cap resource stocks and you would happily only need 8% return on funds you would lend for it to meet your investment criteria please pass over your details and I will line you up with 50+ companies tomorrow who would be happy to take your cash.

I thank you for the note - about financing on a project basis (it's also what I do for a living) - what actually happens in the company (MYG for example) produces financial models to show what they can sustain under certain scenarios and they then look to get banks up to this level.

They will too and fro about all of the details and eventually a bank will submit their financing proposal which will be assessed by MYG until they are all comfortable with terms/ conditions etc but believe me... it won't be anywhere near 75% even if it could sustain it.

Btw I'm not a broker and have no vested interest in MYG other than a hand full of options. I am merely trying to expand on the discussion.