Having looked through the annoucements, I agree that it is...

Having looked through the annoucements, I agree that it is pretty difficult to assess how good this move is.

Ultimately, it means as a whole GDO is more leveraged to the price of gold.

If POG stays where it is at- the rand operations are likely to be cashflow positive and pay itself off in a few years (maybe less with operational improvements).

If POG drops (esp. below 1200), the rand gold mine becomes marginal and we've effectively lost 250million (give or take a few). There would also be potentially a much higher insolvency risk (a risk which did not exist before).

That said, if you are bullish about gold this is still a very good move. The superficial grades below <0.5g/t are unlikely to be economical without a very good processing plant (which would cost a whole lot of capex- might me feasible in medium to longer-term). The underground grades of 5.1g/t are definitely economical.

I think when people talk about cash operating costs of 1200/ounce we are forgetting a very important piece of the puzzle- capex. GDO have flagged very little capex on this project. As it is, mines with cash costs of 400/ounce, often have significant capex assoc., and the overall cash/cost per mineable ounce is closer to 1000. When you factor this in, given that we are producing a profitable miner, the risk/reward is favourable.

I think overall it's probably a good buy. We are essentially getting gold assets on the cheap due to their association with uranium. GDO has demonstrated operational ability, and I am confident that they have done due diligence on the mine. (If you look through Harmony website investor reports you can have a look at how the Cooke deposit was going - look through 2006-2008).

That said, one of my favourite things about GDO was its previously very safe nature. Taking on 60% debt increases the risk of GDO substantially, and I can understand why people would want to opt out. If GDO can make this operational, (and in a dream world this mine will pay itself off in 5 years- given a 20% return!), GDO has the makings of a substantial company!

Mal