I am a long term holder and trader of Tanami Gold. I have...

I am a long term holder and trader of Tanami Gold. I have operational experience of the Tanami and I have done site visits to TAM's Coyote and CTP as well as other neighboring operations (Newmonts - The Granites,ABM Resources - Old Pirate, NTU - Browns Range). At times I have done well trading TAM and at other times not so well. I sold out at 70c and bought in at 4c about 8 weeks ago. I have no specific knowledge of the companies plans or strategy so you should consider the balance of this note as speculation and my opinion based on the facts as I see them.

For new holders and day traders alike, the real value of this company is TAM's Western Tanami Tenements which are highly prospective, the operational Coyote CIP plant, the Kavanagh Lode which will has a pending resource upgrade for coyote (probably only small upgrade but at high grade - my speculation is 150-200K Tonnes at 10g/t cut off - 3 to 4 years mine life at 50K Tonnes/20,000 oz p.a.) and the Central Tanami Project (1Moz) which unfortunately requires $400M+ to get going. The value of TAM's assets have been impacted and steadily diminished by a number of factors;

1. Historically poor financial and operational management
- poor equipment maintenance at coyote
- low productivity in-house resource and exploration drilling
- over-staffing with high cost staff
- lost focus on regional exploration
2. Loans from its chinese major shareholder on credit card interest rates.
- Allied Group have offered the company the rope to hang itself with.
- Allied now have converted their loans and underwritten 2 very cheap CR's to gain a majority ownership
3. Poor broker support
- Only friend was Pattersons and that is a friend who's advice you can do without.
4. Gold price collapse
- They kept mining at Coyote at $1500+ cash cost
5. Poor planning
- They kept mining bad grades 12-18 months back instead of shutting down the mill and laying off staff and doing development work to new areas of higher grade (Kavanagh).
6. They never sold their exploration story to the market
- The market loves explorers. Once you start producing it is all about hitting your targets. TAM always disappointed as a miner and so the excellent exploration story and results were lost
- Exploration focused on the Central Tanami which needed $400M to get going.
- Western Tanami discovery of oxide resources would have given Coyote a lower cost life line when time got tough.

The recent movement in the share price is probably speculative on the resource upgrade for Kavanagh. I have no doubt that the consultants are pouring over this to make it work to restart the Coyote plant. No doubt some of them are forming opinions and speculating as to the likely outcome. Restarting Coyote will require extensive underground development work - I believe greater than just the 300m of decline that was originally anticipated. I expect that if there is $6M worth of development work to get the mine back working with Kavanagh Ore that Allied will offer a convertible note secured by gold production (again with a credit card rate!). With the development costs paid, cash and royalty costs should be able to be kept down to below $900 per ounce by using contract drillers and miner leaving around $400-500 per ounce margin or around $9M of free cash p.a.. No doubt most of this will go back to Allied in the first year to repay the development finance. With the tail wind of a rising gold price and a reduced $AUD then the math will only improve. There is a lot of work to do though. Almost all of the 400 odd staff have been let go. There are barely 10 staff all up if you include the board which means that a lot of the intellectual property for TAM to move quickly and restart operations is gone so expect a good 6 months of development work before there is ore on the ROM.

If the math doesn't work, then you would be looking at sale of the companies assets no doubt at fire sale prices. The CTP project is probably worth $15-20M. The Coyote plant to replace would be between $60-100M but as a fire sale in that location you may be lucky to get $5-10M. The Western Tanami Tenement package and mining leases may be worth $5-7M without the plant. All of that tallies around the $35M that the company is trading at right now so if you have any belief in TAM it would have to be worth more than the current share price.

Do your own research and form your own opinion.