new ann out, page-25

nk - cheers for the comments - you make a lot of valid points.

In relation to production costs - I don't think that HEG can really be valued or viewed as a producer yet and I don't think the company sees themselves as a producer yet either. We're still in a development, resource definition and trial mining phase. On that basis we can't read too much into the current costs.

In relation to recent production - HEG has demonstrated the ability to consistently bring out 10g/t+ ore and also that they are capable of mining at grades of 1oz/tonne+ in the higher grade sections (with some parcels even being over 2oz/tonne). We know from other mining operations that grades above about 8g/t can be economically mined using narrow vein techniques (assuming there is sufficient quantity to sustain an ongoing mining operation).

This central zone that they have recently defined and that they estimate to contain 30koz is an addition to the currently defined (circa 80k) 'partial' underground resource. Its likely there will be other additional ore parcels added to the resource, given the Mica extensions to the north and also the extensions up into the Frenchmans area.

I'm assuming they're getting close to a point where they have enough information to sit down and look at the whole thing, look at the areas they've identified, the most efficient ways to access them, what order to tackle them in etc., and generally make some decisions on the best way to approach mining it on a slightly larger scale.

In relation to cash - yes they do continue to burn cash as they are still in a development phase. How much cash they are burning we don't really know until we get updated production figures - but their cash position was shored up recently with over $7 million raised from placements.

In relation to the share price - no it hasn't moved significantly but it does have the options expiry hanging over it and effectively acting as a bit of a cap around the 25c mark up until the end of this month. The other thing to consider is that the share price has held up very well considering there has been quite a bit of dilution through the recent placements. The share price was also down around 18c only two months ago in early july, so its risen to the current levels in spite of a lot of new stock being issued.

The market cap is arguably high for the stage they are at - it would depend on investors viewpoints on the resource potential, how close they are to cashflow positive production, and also how highly they rate the Hargraves deposit. In the recent presentation Philip Bruce made to the Sydney mining club he drew comparisions between Hargraves and Bendigo that are worth listening to imo.