my apologies Sharpie. The answer is yes they can but not...

my apologies Sharpie. The answer is yes they can but not necessarily yes they will. Their business plan up until now, has been to use the plant to assess the resource and generate cashflow as a bonus rather than focussing on cashflow first and foremost. They can now access enough quality ore to fully occupy the plant but up until now they have been treating considerable quantities of low quality ore as well. The reason they have done this is because, according to their stated objectives, they are still deciding whether to commit to narrow vein mining or to larger scale mining. To this end, they need to know how much gold is in the rocks surrounding the quartz veins as well as how much gold there is in the veins themselves.

Because market conditions have deteriorated, my opinion is that they should have switched the mining focus at Hawkins Hill Reward from investigating which kind of mining operation is more suitable to developing the operation in its current narrow vein configuration. The installation of the alimak and the mine operations in general indicate they may have made the decision. Now would be an appropriate time for them to make an announcement that the company is fully committed to narrow vein mining at Hawkins Hill Reward and is extracting the resource at the maximum safe rate.

Hawkins Hill reward has more than five years inferred resource at an extraction rate of 30,000tpa. This resource has a current inground value of almost $A95M at $A1100/oz. The stated grade is an average of 16.9g/t but my expectation is that the grade would average closer to 23g/t. By selectively mining the higher grade Paxtons and M2 resources first, the company could expect grades for the first year to average at least 45g/t and possibly as high as 60g/t. It we use the lower figure of 45g, then the value of gold extracted in the first year comes to just under $A48M. This gives a $A20M buffer to finicky's calculated cash outflow requirement of $A28M.

Let me wear the gold bearskin for a moment and see how low the POG could go for HEG to still be able to fund this outflow requirement.

My expectation is that the company can extract 43,500oz of gold over the year. They need to be able to sell this gold for a minimum of $A28M. This means they must average $A28M/43500oz = $A644 per oz.

So the company is in a position to fully fund their operations over the next 12 months provided they can average $A644 per oz, they make the decision to mine the M2 and Paxtons orebodies and they mine and process ore at an average rate of 100t/day.