In the past couple of weeks RED has had a dramatic positive...

In the past couple of weeks RED has had a dramatic positive change in its circumstances, each of which has de-risked the development of Siana:

1. Siana Notice to Proceed granted.

2. RED completed debt/equity package.

3. Mapawa drilling program arranged.

These were the outstanding issues that have dogged RED's share price for the past years!

As well as that gold has gone to record levels, despite the BFS being completed and confirming project viability based on a US$800/oz gold price.

Although gold may have come off its record US$1,220/oz of last week, the fact remains that RED is poised to become a LONG life, LOW cost gold producer.

RED's exploration potential, particularly at Mapawa where there is potential for a world-class gold/copper porphyry, is due to be demonstrated in the next months.

Mapawa exploration provides 2 dimensions :-

1. There is likely to be a gold resource of between 3 - 4 million tonnes in surface material, that can feed into the Siana operation.

2. Below the gold cap is a substantial geophysical (IP) anomaly that proves the existence of minerals usually associated in large porphyry systems along with copper/gold mineralisation. The anomaly at Mapawa is substantial, with a 0.9km footprint, suggesting potential for a WORLD CLASS porphyry deposit. This technical information is supported by the fact that lying up the road at Boyongan is a huge copper/gold project owned by others. Mapawa could be larger than Boyongan based on the IP information!

The funding package provides in excess of the minimum required to develop Siana, thus ensuring that all exploration drilling of Mapawa (and extensions to Siana resources) can proceed without any further funding requirements.

Based on a gold price of US$1,150 I estimate the fundamental value of Siana alone (90%) represent 29 cps based on the extended share issue, PLUS $21 million in the bank - another 2.2cps.

On my valuation Mapawa remains unvalued (ie 0 cps!). Mapawa drilling results in the next couple of weeks could change the valuation of RED completely, it could more than treble RED share price value!

We now know that considerable numbers of insto's have taken up a combined 290 million shares (if we assume 31 insto's then average take up is only 9 million shares each, ie $1.5 million). It is clear that some of those insto's will want to increase their exposure to RED as time proceeds. I believe that underpins RED's share price at current levels and probably will ensure RED will never trade at below current levels. Any slight drops in gold price will be an opportunity to increase RED holdings by any of those groups.

At first production RED is likely to trade above its implied fundamental valuation, based on Medusa (MML) and CGA Mining share prices. MML, with a similar total gold resource inventory to RED, and located in a similar historic gold setting to RED within 150 kms of RED in Mindanao, suggests RED share price (assuming the expanded share structure) could be 4.48 times current share price of 16.5 cps ie 74 cps - this does not imply RED value of 74 cps, it just reflects potential for RED share price upon gold production. Remember, with the latest announcements Siana is now virtually de-risked into gold production.