Hi Foyt,This is a classic case of the devil being in the short...

Hi Foyt,

This is a classic case of the devil being in the short term detail associated with a potential bonanza emerging out of the blue.

The fall in prices and possible rise in cost is a relatively small but immediate problem if all the cash at bank was used up getting to first production..

The discovery of the fault which could lead to the bonanza could delay the ramp up if other lodes aren't developed. The inferred resources to the north of the fault, which are not there have likely not been lost, a good theory is they have been pushed deeper into the deeps.

The Hedging at $12,500/t:

In a big picture sense the ES copper price of $13,500/t associated with forecast costs would deliver $6.5m/mth of free cash flow from operations running the plant at 40% capacity.

That is well more than enough to cover the capital costs of circa $4.5m/mth for the ramp up to 40% capacity.

Dropping the price to the hedge price of $12,500 drops the free cash flow by $ 1m a month which is not a problem.

A 5% increase in costs drops it another $500k so still not a problem.

The cash crunch:

The problem is we will be a few months getting to free cash flow of $4.5m/mth.

The first month was forecast to deliver 350t which delivers circa $1m of free cash.

The CR:

It makes good sense to raise a few million to get back on track ASAP to ramp up to 40% capacity . Its a no brainer to raise a bag full more to drill out the deeps which looks like being the grand prize.

The Fault.

I'm pleased to report that Peter Rolley who lives in Perth was manning the booth at Fremantle in his new roll at a Consultant.

The late discovery of the fault does not reflect badly on him or the future of the underground mine. His move to consultant was a personal decision supported by the company apparently.

Because the fault runs across the lodes in the same direction as the drill holes from the surface it was missed until the under ground drilling which fans out from underground drill positions picked it up. Which led to the discovery of the potential resources in the deeps

Tomorrow all will be revealed hopefully.