Huntleys' RecommendationIncreasing mill throughput and grades...

Huntleys' Recommendation

Increasing mill throughput and grades should result in rising production and declining unit costs by CY05. In addition, costs should benefit from the commissioning of the geothermal power station in April 2005. The problem however is LHG’s hedge position, which accounts for over 40% of expected production for the next three years at an unfavourable US$330/oz rate. Similarly, our expectation that head grade will fall back to the long term reserve grade early next decade, in the absence of any higher grade discoveries, makes it difficult to generate a favourable NPV. Our current valuation is A$0.33ps based on a gold price of US$400/oz, FX of 0.72 and discount rate of 10%. We struggle to derive meaningful value for the company and retain our "Sell" recommendation