slip, slip, slipping away., page-3

For those that like the reassurance of broker reports, this is from Paterson's (1st March 2012). They have a BUY rating on the stock and a TP of $2.17.



Full Year Results

? DRA produced a loss after tax for 2011 of $6.9m down from a $21m profit in 2010. Year on year total gold production for the group was down 23% to 54.8koz resulting in revenue falling 18% to $75m. We see a tough 1H2012 as continued high costs associated with the Svartliden cutback and lower production at Vammala impact profit margins. The successful completion of the $15m rights issue has unlocked significant exploration upside by funding the aggressive $18m exploration program planned for 2012. We maintain our BUY recommendation with a $2.17/share price target.

? Full year result impacted by capital works. Cash costs
increased 49% to US$1014/oz in 2011 largely due to the waste stripping campaign in the Svartliden pit being expensed rather than capitalised. The variation in accounting treatment increased cash costs US$246/oz adding an estimated $7.8m to operating costs for the year. Once the stripping campaign is completed in 2Q cash costs at Svartliden should decrease to ~US$600/oz.

? Facing a difficult first half. Profit for 1H2012 will be subdued with the continuation of the Svartliden cutback and largely development ore being trucked at Kutema, restricting gold production and putting upward pressure on costs. However, we should see an improvement from increased ore and grade coming from underground stope
production at Svartliden and Kutema in 2H2012.

? Aggressive exploration program in progress. The recent $15m rights issue has provided funding to ramp up DRA’s exploration activities, with the company planning to spend $18m-$20m on exploration activities in CY2012. $13m has been budgeted for drilling at Kuusamo on a 40,000m diamond drilling program. 2 rigs are currently drilling with a 3rd arriving in March. Provided further rigs can be sourced, the program may be increased to 60,000m. 2 surface rigs are drilling at Svartliden while 1 underground and 1
surface rig are also operating at Jokisivu.

? Metallurgical test work upcoming. A company is due to be
appointed for bulk scale met testing on the Kuusamo project in the March Q. Kuusamo is DRA’s main growth project and a positive metallurgical solution is a major catalyst for the company.