prospectus , page-60

Longshott,

Good on you for showing some interest. I have no idea at what level I need to pitch this, so I will start quite simply and let you build up the analysis in stages. I'm not a bean counter either. I'm just putting out my thoughts developed in the last few weeks, so anyone feel free to correct me if need be. There are many ways to value a stock. You have started down a cashflow approach that aims at assessing profit/loss, whereas I was suggesting we use a balance sheet approach. An analogy might clarify the difference. Think of a bath with water flowing in via a tap and out via the plug hole. Net cash flow essentially reflects the flows in and out of the business. The tap/plug is opened on the first day of trading in the financial year and closed on the last day. Conversely, the balance sheet reflects the water level of the bath and thus all the historical net flows that have occurred over the years. The balance sheet is a stock concept as opposed to a flow concept.

Ideally, we would create a discounted cashflow model (DCF) that would project forward expected net cashflows over 20 plus years and discount them back using a discount rate. Broker coverage will do this and there would be numerous emails/meetings with PLV to clarify aspects of the flows. A balance sheet approach is much simpler, but has the drawback that it is historical. That is, it's backward looking rather than forward looking. I say this because I would hate to see people getting the next annual report and simply using a balance sheet valuation to dump stock. Markets are forward looking. We are simply using it because it's simple and we can get a rough valuation from it.

I would hope you have access to Excel software (the mother of all calculators) and if not, I would strongly suggest you get it if you intend to adopt an analytical approach to your shares. Enter in each line item of the balance sheet from the half yearly, but if your short on time, just enter in the total assets, total liabilities and net assets (assets – liabilities). We know this balance sheet was formulated on 100% PLV ownership of Cockatoo. I have consistently stated PLV needed a JV partner to reduce risk. What exactly does that mean? It means they take half the asset and half the liabilities (forget revenues and costs as they are flow concepts). Since our exposure is reduced, our risk is reduced (as is our return).

With absolute certainty that your analysis will be wrong at this stage, reduce the balance sheet assets that are Cockatoo related by 50%. Mine properties (Cockatoo) have zero value due to those nasty auditors. Half of nothing is nothing. Assets remain largely intact. Now take 50% off the liabilities (most are Cockatoo related). Subtract liabilities from assets to get the new Net Asset figure and then divide this by 246,593,087 shares on issue (We can deal with the placements later). The answer is your share price valuation.

How about I stop at that and see if there are any objections from the more accounting minded. If you are keen and given you now have the methodology, perhaps you can go thru each line item one by one and make a judgment call. Line items like the debt figure in the half yearly is out-dated (its been repaid) and can be updated from the quarterly report figures. If you are confident add in the new cash balances from the quarterly, together with the placement cash and adjust the divisor (number of shares on issue).

Cheers
Bleasby