red value remains strong, page-6

Hi Yuyu, good to hear from you - and glad you remain with the "team". I had a great time, but to be honest i even started missing the missus after a while!

Based on the production profile that RED has indicated there is a gradual rise in gold production years 1 through to 4 (from 45,700 ozs to 127,000 ozs - silver profile actually goes the other way!). The overall impact is for EPS to gradually increase year on year, for the first 4 years being: 4.3 cps, then 6.4 cps, then 7.8 cps, then 11.0 cps).
[This assumes RED increase to 949 million shares expanded capital base, AUD/US$ 0.9; US$1,150/oz Au, US$18.0/oz Ag, 90% Siana interest to RED].

I suggest that this profile is somewhat conservative, it does not include any take up in the changeover from open pit to underground, of inclusion of trucked ore from Mapawa that should increase gold production in years 3/4. It also doesn't consider the zinc circuit that I understand could appreciably drop operating costs with a minimal capital investment into a floatation circuit from years 3 onwards.

I think your comment re the comparison of MML and CGX shares is not actually relevant, its more about market cap comparision and revenue streams, eg (assuming shares expansion):-
RED 949 million Market cap (@$0.165) = $156.5 million
MML 169 million Market cap (@$3.91 ) = $660.8 million
CGX 284 million Market cap (@$2.14 ) = $607.8 million

MML is a more relevant comparison due to the similar location, similar resource inventory, similar production base over the next few years (CGX is a bulk mining operation, but will be hugely negatively impacted with rising power costs, RED does not have to worry about increasing diesel/fuel oil power generation costs).

The other issue to consider, is that whilst RED is yet to be transformed into a similarly rated gold PRODUCER, its increasing shares, increasing price, will move it sometime into the TOP 200 ASX Index category - when MML went into that Index its share price went ballistic due to funds HAVING to take up shares! RED is yet to enjoy that transition, but it should happen with a share price moving above about 25 cents (into the ASX 200 Index is not mandatory as market cap increases, it also requires liquidity but RED has already demonstrated that liquidity component).

I firmly believe RED's re-rating is yet to come, it will come in the next months as the market realises what is happening with Siana, AND Mapawa could accelerate the process considerably!