WAF valuation, page-199

Hi @Romacker

That and others have given a reasonable summary of my position.

Let me summarise some of my long standing opinions

1) The deposit is world class

2) The project is of very high quality with high grade and low operating costs by industry standards but requires more deep drilling to extend its life of mine which remains limited because the high grade deposit at M1 has limited horizontal extent and needs to be drilled down plunge at considerable depth which is an expensive exercise when conducted from surface using expensive diamond drilling techniques. Resource and reserve extensional drilling is more practically done once UG mining has commenced and reached appropriate depths. So the rate at which the company will add to its resource/reserve will be diminishing (in the absence of a new discovery) because drilling gets harder and more expensive. My personal opinion is that the deposit at M1 will continue to great depth so the life of mine represented in the current feasibilty will under represent the ultimate life of the mine. I'm bullish on this proposition.

3) The company is being groomed by large Australian and international merchant banks to be ultimately acquired as cheaply as possible by B2 Gold and it's share price has been manipulated down since early last year. Retail investors, local stockbroking firms and clients of local stock broking firms have been the main losers in this process. My theory for a long time now is that B2 Gold are waiting until their expected free cash flows from the Fekola mine in Mali reach expected levels and their share price rises as a consequence before commencing an all script TO of WAF. I guess this will occur when B2 Gold's share price trades between $5 and $6 (probably closer to $6). This could take the best part of a year to achieve IMO.

4) Although the security situation in BF is deteriorating it is containable with the help of the French and as mentioned in previous posts Sanbrado is within a more culturally and geographically secure part of the country and is easier to defend than projects in lateral areas to the north and east. The biggest sovereign risk concern comes from political instability that Jihadists attacks may ferment through discontent, fear and economic decline, not the attacks themselves.

5) The company recently raised debt and equity funding to build the mine at Sanbrado but the quantum of money raised including cash in their treasury at the time was significantly higher than the current feasibilty suggested the company needed. The value destroyed by the "excess" dilution will not be recovered, particularly if the compamy is taken over early in its life cycle. Once again loyal and long term investors both retail, institutional and sophisticated investors are the ones that lost out in the share confetti give away. No point crying over it, what is done is done and it can't be reversed. I had one question arising out of that exercise in excess capital raising which the company has not addressed at all or explained, Why? Are they hiding something about the up front costs of the project. I read it as "expect a cost blow out" until it's properly explained. They might dress the blow out up as an expansion to the expected production scale.

6) I have written at reasonable length on the different risks using a "turn key" build model and an owner build model so won't go into that in detail again. Fundamentally and I've said it before the owner build model offers more flexibilty in the timing of the financing for the build but unfortunately for longer term shareholders this benefit was not used in our favour. We seem to be getting the worst of both worlds. The owner build increases risk but the pay off should be a cheaper build, why then a capital raise which raised $100 million more than the feasibilty suggested? Personally I think building this mine is at the very top end of the pay scale for this company, particularly under the current tense in country circumstances and there are significant forward risks associated with this build that should also be factored into the share price expectation. If they can't get through with the money raised investors need to brace for significantly more share price pain IMO. So risks to consider there.

7) As far as the chart goes I haven't looked at the technicals for a while but I'd say based on my Ichimuko charts the company is not a buy or hold on the daily, weekly or monthly (I'd need to check the monthly). I made the mistake of ignoring those same technicals and buying based on the value proposition, ie EV vs NPV.

I can't give advice but from my personal perspective I still believe I will recover my 31.8 cents average but I don't believe there is any real upside much beyond that. I'm currently working on a 36 cent target in a TO situation. My personal investment in this company hence has been a bad one, with no real upside remaining. Just a question of holding out to see if I recover my money (possibly with a small margin for profit). What does that mean for an investor entering like youself at this level? Well IMO the upside will be limited to about 30 to 40 cents which is a return of between 33% and 77%. Is that enough of a reward considering all the known and unkown factors on the table and how long one might need to wait? Of course these upside limits are my personal opinion only so it's up to each investor to determine their own risk/reward. Without the prospect of a TO the upside would definetly be much higher IMO and a WAF would represent a great long term investment (5 to 10 plus years). Unfortunately the company is wide open to attack with limited ways to defend its value from the attackers so the long term value will belong to somebody else. I hope RSG can make a move before B2 Gold but RSG still have their own story to prove in the next 6 to 12 months.

Good luck and I hope that helps.

Eshmun