Anderbond, I agree with your comments but the interesting thing...

Anderbond,

I agree with your comments but the interesting thing about Mapawa isnt the elephant potential. When they drilled it out they wanted to get the shareprice up and so were going for big hits at depth. Getting something like that up is a billion dollar proposition - reads great and adds optionality but not really something Red 5 could pull off.

The big deal is the near surface stuff with decent grades (ie 1.5g/t+). This was previously mined by Suricon and there is clearly ore there - how much? what grade? what kind of met recovery These are the questions. However it is definitely within trucking distance and when you have a mill running right there at 60% of capacity, this kind of material is very valuable indeed.

Similar story for the old tailings.

My vision is to see this doing 350ktpa of ore at 6.5g/t from underground at 87% recovery for 63kozpa at very low cost (AUD$500-600/oz or less). You then get the mill to capacity with another 650ktpa of feed from a combination of the existing pit, tailings and satellite ore. Assuming 1.8g/t on this and 83% recovery you pull another 31kozpa out taking total production to just under 100,000oz a year (94kozpa to be precise).

Perhaps cash costs on the lot is AUD$650/oz for AUD$800/oz cash margin. This equates to AUD$75mpa before capex, corporate etc. Lets say Capex run at $10mpa corporate at $6mpa, so earnings before tax are AUD$59m and $40m+ after tax depending your assumed rate. Existing tax losses mean the earnings may be closer to $50m than $40m for a while..

Take the $40m and put it on 8 times price to earnings and we get $320m. 760m shares out so value per share on that maths is 42 cents!!!!

I happen to also think gold is going up a long long way too so the numbers using spot prices will be way low if I'm right. That's why I say original shareholders might even get their money back, and yes that means $2 per share. Sounds over the top right? But if this gold goes higher and I'm right about the production then profits could easily be double my forecasts ie $80m post tax (implies around AUD$2000 gold).

In a decent gold market a PE ratio of 12-15 times is not unrealistic at all, so $80m*12 = $960m = $1.26 a share. $80m*15 = $1200m = $1.58 a share. So on that maths $2 isn't just a complete impossibility.

Thing about markets is the more extreme one way, the more extreme the other. This gold bear market has taken gold stocks all the way back to 2000 lows. Wouldn't have believed it possible but I can assure you, when the turn comes it will be huge and RED is alive and kicking with profits even today, even at these gold prices and even battling all the challenges thrown at them.