McPhillamys, page-43

There was an announcement on 8 September 2017 about McPhillamys Gold Project - Pre-Feasibility Study.

The following are my take on the PFS. I would very much appreciate any insightful counter-arguments.

A gold price of A$1,400 per ounce was used in Ore Reserve pit optimisation at the time. Now that POG is almost doubled, the reserve will most likely be upgraded in the upcoming DFS.

Capital cost of development was estimated at A$215 million including water pipeline (page 14). The development Capex increase relating to inflation should be comparable to AISC increases. For the sake of argument, say AISC has increased (1.62x) from A$990 then to A$1600 now, the development Capex will therefore likely be inflated from A$215 million to A$350 million. Capex increases due to other factors such as higher ESG compliance requirement and higher construction specifications etc. are harder to estimate. If we allow 150mil-200mil (70-90% of original Capex estimate) for contingencies, the total cost will be in the vicinity of A$500 million to A$550 million.

Post capex, pre-tax NPV5% of A$525 million (page 16) was based on a gross margin of A$610/oz ( A$1,600/oz gold price less A$990/oz AISC). Based on current gross margin of A$1,100/oz ( A$2,700/oz gold price less A$1600/oz AISC conservatively), everything else being equal (LOM production etc. page 4), post capex, pre-tax NPV5% now should be at least A$947 million. This is without taking into account possible reserve upgrades due to increased POG.

The MGP requires an overall makeup water supply of approximately 5Gl/annum. As detailed in Page 11, although Regis has to pay for the water pipeline (38 mil original estimate, page 14), it will get quantity of water in the order of 4-5GLpa at no cost for 10 years from Mt Piper Power Station and Springvale Mine, with Regis having an option for a further 10 years, which shall not be unreasonably withheld by the counterparties. This should reduce the ongoing AISC at McP relative to other mines.