Hi Bsredoje,I am glad you have noticed the appreciably...

Hi Bsredoje,

I am glad you have noticed the appreciably attractive EPS I have worked from the base case Siana project. When you make the financial numbers comparison to Lihir Gold, I assume you are referring to its flagship operation on Lihir Island?

Have you actually looked at the Siana cash flows yourself, I suggest you consider the following, although I do not want to suggest that Siana is anything as substantial as Lihir, the latter being in the top 5 gold operations with huge ore reserves/resources on a world-wide basis, but what your comments do reflect that RED is a hidden gem, which is due to be substantially re-rated closer to its production time.

As to your comments that you consider my estimate of EPS for Siana to be excessive (and favourable compared to Lihir), I suggest you consider the following:

1. Siana development is clearly a smaller development, with total reserves of 850,000 ozs. However it does benefit in it being a lower cost (US$/oz basis) to Lihir, for the reasons of:

a. It is planned as a straightforward CIL operation, with no intention to have floatation (not in the base case on start up, this maybe included year 4 for zince recovery) and autoclaves etc, unlike Lihir, that has not only incurred a high capex cost up front but also an ongoing impact on operating cost, notwithstanding that Lihir has substantial economies of scale.

b. Siana power is sourced from a sub-station off the national grid, at an indicative rate of US6cents/Kwh, I am unaware of the cost of Lihir power unit costs but since it is generating its own power I presume it would have to be substantially more than US 6 cents/Kwh.

The BIG plus for RED:
RED is still finalising its tax arrangement with the Philippines government instrumentalities, but you may not be aware that all new gold projects on start up have a tax holiday for the first 50% of indicated life of mine. Thus for RED there is no tax for approximately the first 5 years of production. I suggest that is the main contributor to the EPS figures I have estimated.

I do want to emphasise that I consider the cash flow model to be conservative notwithstanding the likelihood it will change dramatically once RED has the opportunity to undertake drilling below the immediately existing pit bottom (after de-watering) and also Mapawa gold cap resources are included as reserves into the mining schedule.

I hope this does demonstrate that RED is likely to enjoy a fantastic start up to its development at Siana, and this should be reflected in a considerably higher share price from what it is today.

Since you are a shareholder in RED Bsredoje, I suggest you will enjoy that share price appreciation once the market realises RED is sitting on a REAL GOLD MINE!