As previously discussed I think some people are confusing the...

As previously discussed I think some people are confusing the $300-$400 stated as cash costs and using them as total costs. What i've done with my estimates is taken a more prudent approach as per the following:

Current Base Case Scenario:

100,000 Ounces produced
$1,200 gold price
$700 total costs
$500 margin
$0.25 EPS (roughly)
Current Share Price $2.20
so a P/E of 8.80

Increased Gold Price Scenario:

100,000 Ounces produced
$1,400 gold price
$700 total costs
$700 margin
$0.35 EPS (roughly)
Continuing to use P/E of 8.80 = Target Price of $3.08

Increased Gold Production Scenario:

150,000 Ounces produced
$1,200 gold price
$700 total costs
$500 margin
$0.38 EPS (roughly)
Continuing to use P/E of 8.80 = Target Price of $3.34

Increased Gold Production and Price Scenario:

150,000 Ounces produced
$1,400 gold price
$700 total costs
$700 margin
$0.53 EPS (roughly)
Continuing to use P/E of 8.80 = Target Price of $4.66

The above scenarios are an extremely rough guide as to where the price of Medusa could go but it is essentially the basis as to why I continue to hold. Production of 150,000 next FY is not out of the question given they are targetting 200,000 per annum so is a pretty prudent assumption i think. Then even if gold remains at the current 1,200 level and we maintain the same P/E your still looking at a return in the vicinity of 50% from current levels.

This is obviously not gospel and just my opinion but it is why I continue to hold. If actual costs are lower, it helps the position, if production is higher, it helps the position, if the gold price increases, it helps the position, all at a relatively low P/E as well. Obviously a very simplified way of looking at it but in my view there is a lot of blue sky potential here with the risks relatively priced in. Patience will be the key and while I was hoping the share price would reflect more of the potential by now, I still don't think its out of the realm of possibilities to reach our peak again should the price of gold appreciate rapidly at some stage.