Hi Kent,Thanks.I totally understand your point regarding their...

Hi Kent,

Thanks.

I totally understand your point regarding their estimates always being $400-500 and that based on volume, we will be the winner in the long run (tortoise v the hare scenario).

My difficulty now is grasping the fact that at $400-$500 an ounce margin, and only working on Coolgardie, we would have made this work and could be making good cash flow (as opposed to profit which I no doubt they will post), but with CRE being thrown into the mix, the ball game has changed.

It makes sense to maintain this philosophy given that our ounces increase rapidly with CRE, but I really expected that Coolgardie along would have been 3/4 of our current production and that the development and associated costs would have been much lower. To me, CRE has proved after 12 months, to detract from what FML actually could have done with it's own tenements. We had the ability to maximise mill throughput and at higher grades. We have only partially achieved this and sunk a hell of a lot of cash into Laverton which would have otherwise been sitting in our bank account.

Add to this, the ballooning balance sheet and at a PE of just 5, it even become questionable how much higher it should be. At this rate, we are tracking at say 10% amortization of development costs across the group which equates to about $115/Oz for the next 5+ years. This excludes exploration and admin. So, if we make $400/Oz profit as a group and have already lost $115/Oz as a result of all those deferred costs, then that only leaves us say $285/Oz to cover off admin, exploration and profit (not to mention unknowns). If Gold fell to $1400/Oz, then we sit at say $100/Oz left to cover off these items. Will this leave any profit? Doubtful.

I am remaining in FML for the simple reason that it extremely leveraged to the price of gold. Thus, my investment in FML is now an effective investment in Gold. If Gold goes up 20% from current levels, then instead of having $285 left to pay for growth and maintenance, we have $593 and as such, an increase of 108%. I then need to bank on the market seeing this.

I don't know really. I am disheartened by what has / is happening with FML. I realise that many investors are in the red across many stocks in recent times, but I fooled myself into thinking FML was different. They are suffering from the 2 speed economy and have to put exorbitant fees for contractors which in my mind are not justified. They have been victims as have many others, but they should have changed more quickly and realised that as much as CRE had to offer, it was going to take a lot of investment to make it profitable - and they did this at a time when it was clear to everyone that mining costs were blowing out of all proportion rapidly.

For me, they did not make the best strategic decision for the foreseeable 12-36 months, but in the long term, their course of action may be well justified as you have stated. We are the tortoise.