Why not give back to shareholders now?, page-8

X, If you are really interested in understanding where HGO is heading financially you should first read the Expert Valuation that was attached to the Notice of Extraordinary meeting late last year when the Bonds converted early.

In Summary HGO was forecast to generate a pile of cash with a NPV of 15.5 cents a share over the ensuing three years from the completion of the mine plan for the Giant Pit.

Because of the carried forward tax losses only $8 m of tax was forecast to be paid on that cash taking the franking credit account up to $32m

The valuation assumes that the giant pit is all there is to HGO and it is wound up after the processing is finished and $12.8 m is spent on wind up and the plant and equipment is sold for $24.3m. So nett gain on wind up approx $12m

IN a nut shell if the Giant pit is the only game then, over three years the company will generate 15.5 cents of surplus cash per share and have franking credits of 5.6 cents a share.

If thats what happens we can expect to get 13 cents in dividends franked up to 18.6 cents and a final return of capital of 2.5 cents less what they spend above forecast on any wasted drilling.

My optimistic view is that the PHES scheme will eventuate and the drilling will prove up resources in abundance and mine life will be extended and the market will price HGO on a multiple of the annual earnings.

I think with Tony Breuer on the board the company won't be buying back shares with the cash. They will take the more expansive route of maximising dividends to lift the share price to get us back into the S and P indices and then raise capital against the elevated share price if the need for capital expenditure arrises.

A company with a bright future and 570m shares paying 4c fully franked dividends could well be back in the top 200 and be trading north of 80c.

That could be Xrated dreaming.