how much is fml worth?, page-4

This may assist with your valuation, although note that its about 4 months old.

FML Focus Extract from Patersons note Mar 2009

Focused on gold production

Investment Highlights

• FML is in production with a 1.7moz resource base and following a recently placement (and SPP) is fully funded to expand to 100kozpa production from 2011 onwards. The company trades at an enterprise value (EV) of A$31/ resource oz well below its peer group average of A$107/oz. We believe this gap will close once meaningful production is reported throughout 2009. Our DCF valuation for FML is $0.08/sh. We note this moves to $0.10/sh if we assume US$1,000/oz flat gold price and $0.12/sh for US$1,200/oz flat. Given the lack of production history and resource to reserve conversion needed from here to meet production budgets we rate FML a Speculative Buy.

• Re-rating with Production Ramp UP. FML will increase production to +100kozpa as the 1.2mtpa three mile hill (TMH) processing plant is brought back into production late in 2010. This should see FML's EV/oz produced metrics reduce from $1000/oz to $320/oz gaining market traction, greater earnings leverage and precipitate a re-rating.

• Funding Completed. The refurbishment of the TMH processing plant is set to cost $18m. In addition the company earmarked $8.4m to be spent on resource definition and enhancement. Following a placement and SPP which together will raise $28m (at $0.02/sh) these projects are moving ahead. FML will receive the bulk of this funding in early-April as tranche 2 (1,300m shares to be issued) requires shareholder approval (meeting 3 April 09).

• Attractively Priced Resources. Whilst we acknowledge the capital intensive nature of developments at Coolgardie, driven by modest grade, smaller sporadic mineralised areas, the EV/oz metrics for FML are cheap. The company trades (pro-forma, post capital raising) on $31/oz versus peer producer average of $107/oz. It is also attractively priced against PatersonR17;s broader average for the sector (producers and explorers) of $146/oz. Our DCF valuation (EV: $140m) implies an EV/oz multiple of $80/oz.

• Leverage. FML has significant low grade resources at Brilliant and Lindsays. These resources form a base load throughput late in the project life on our assumptions. These ounces are unlikely to be economic at a gold price below A$800/oz and not provide an adequate return on capital below A$1200/oz. However these deposits provide significant valuation leverage for FML with current gold prices. A 10% change in our gold price assumptions translates to a 25% change in valuation.