Qtly Report Update, page-7

All4One

I rang the company, spoke to both Paula and the CFO, they informed me of how the gold was accounted for. Cash element of the $44.6M is about $26-27M.

They use an average cost model to determine the AISC. Production costs include the effects of ore stockpile inventory movements. If the cost is not allocated to the produced gold as per the the qtly it is allocated to the ore inventory. The ore inventory went up by $27M in the first half of the year. This is mining cost that has not as yet been expensed. Expensing this cost would increase the average cost per oz by approx. $500 in the first half. If you look at the inventory levels, the stockpiles are actually declining while the cost reported has been increasing. This makes no sense unless either you are allocating more cost than you should or your overall cost base is exploding. The reported Sept qtr figures are consistent with this trend continuing.

The debt point I don't argue with, other than to point out that the MACA and other debt must have increased from $21M to about $26M rather than the $18M that is stated in the latest presentation released.

W