q and update, page-10

Reserve statement for Murchison in third quarter after drilling increases confidence, will allow for a more realistic mine plan from the current 3.5 years.
We have resources in the Murchison of 4.5mill tonne for 419,000oz @ 2.9g/t using the higher cut-off grade.
At 250,000tpa, that implies 18 years of production or 9 years after allowing for expansion to 500,000tpa (phase 3).
Almost all of the resource is within a likely pit outline so only infill drilling to increase the confidence is needed.
If the early infill drilling results trend of higher than expected grades continues, we will end up with more ounces and at a higher ave grade.
The resource is certainly open at depth at both Gab and Burn so there is good potential for a longer mine life than 9 years- or for an increase above 500,000tpa.
We have 10.5Mt of lower grade "waste" which should average 0.9g/t most of which will already be dug up and only needs to be heap leached at much lower cash costs.
We have capacity to heap leach at around 900,000tpa.
I am allowing for 750,000tpa which would give us 14 years of production from heap leach.

It is becoming increasingly obvious the cash costs will be lower than forecast for phase 1 with the higher grade zones.
Phase 1 should cover all our costs so there should not be any need for a cr until after construction begins at either Andash or Jervois.
Phase 2 will very likely leave us cashflow positive by around 9mill per year after allowing for 5mill admin, 6 mill exploration/FS costs and 1 mill for sustaining capital.
We will likely use more than $6mill for exploration/FS but that money is used to increase and advance our resources and therefore increases our NPV.
Stage 3 should leave us with free cash flow after the same expenses mentioned above of $20mill per year. That puts us on a cashflow multiple of around 5 with a likely mine life of 9 years.
Stage 4 is likely to improve the cashflow further and add mine life.
I think this allows for a rise in the sp to at least $1.50-1.75.
Assumptions -spot prices of 1650 and AUD at 1.03.
I allowed $800 cash costs on the heap leach operation.
With mining costs already paid for by the CIL operation, I am thinking $800 may turn out to be very conservative allowing for more upside.
It will depend on many factors. Will ore from some pits be suitable for dump leach, will crushing, agglomeration be needed, etc.


The mid point of the exploration target for Jervois (7.5Mt of ore) would give us a resource of over 19Mt.
That should push us up to the 2.5Mtpa case for processing 16.3mill tonne of ore with its NPV being around $2per share.
Likely further additions through depth extensions may increase that NPV further.
Obviously more work is needed and it will take time for the sp to get there, but I see good potential to reach $3-4 on the Australian assets alone.

Andash has a NPV of over $3 just on reserves which give a 6.5year mine life.
Management expects near mine resources to extend life beyond 10 years.
Depending on grades or the additional ore, that could add $1-3 to the NPV, for an NPV of around $4-6.
Even after discounting that for the delays and political risk, how do we arrive at $1?
Especially when we have the Australian assets.

Cap and operating costs have skyrocketed.
These are factored in to the above.
What is not factored in is a very likely increase in metal prices, but thats another story.

Opportunity is knocking again.