First up - for me this is a very pleasing and positive...

First up - for me this is a very pleasing and positive development.

Going into this I was concerned that the whilst the open pit might grow in life, the strip ratio would rise and make the whole thing a bit marginal. So I think two and a quarter really good years is a great outcome, particularly when the risk profile of the operation has declined significantly.

With respect to the numbers, readers should consider that new management have consistently under promised and over delivered. I believe this guidance still factors this in, particularly on the cost front.

The open pit reserve grade is now 3.5g/t - this is an amazing number. It is also still conservative when you read the fine print on the notes. The mill has seen an overcall factor of 25% to date but the model uses only 15% and only on +1.2g/t material. It other words, there is a reasonable likelihood that actual grade is even higher than 3.5g/t.

The cash cost forecasts they have provided appear to use recent $/t mine and milling costs. These are high, which has been discussed previously and in my opinion will see some significant declines.

As an illustration - strip ratio has been stated at 4.5:1. At $6/t mining costs (15 per bcm) mining per tonne of ore is (4.5+1)*6 = $33. $15 per bcm is a high mining cost and they will do better than this in my opinion.

Adding $30/t for milling (again high - this should be closer to $20/t or less) we have mining and milling costs at $63/t.

At 3.5g/t and 85% recovery, each tonne delivers 2.975g of production, or 2.975/31.1 = 0.096 of an oz. So the cost per oz on my metrics is 63/0.096 =AUD659/oz = US460/oz.

This is just below the bottom end of the guidance range, also my number is before any silver byproduct. In my view, costs will be 20-30% lower than this, so I think US$350/oz is where the numbers will fall out.

On production, the same applies - 650kt of ore at 3.5g/t and 85% recovery equates to 73,000oz of production per year!! We already know the mine can do much better than this in the dry, so 650kt is not pushing the envelope at all.

The fact we have seen such a big open pit grade increase (which by the way makes the grade exactly in line with historical production) bodes very well for the underground development. Historically underground yielded 11.8g/t!!!!, so I think the underground will do much better than the existing 5.8g/t reserve and 6.7g/t resource grade. Quite honestly I think 8g/t is very realistic. At this kind of grade, the underground will be very very profitable.

Siana has always been about the underground, I like the fact they are now moving with a very low risk underground mining method - it really instills confidence on delivery.

I have no doubt at all the cash flow from the open pit will easily fund the underground. So now we can start to talk about exploration potential and finding some ozs to fill up the mill over and above the underground.

All in all I can see how the foundations for +100koz of low cost annual production in 3 years is being build and that will be worth many multiple of the current market cap in my view.