Ann: Market Update - Engenho Gold Mine Brazil , page-8

goarmy

MUN is in considerable difficulty because their current operation has pretty much run out of its economic deposit and they are unable to gain access to their nearby orebodies.

They have not finalised the funding arrangements in relation to the closure that operation and until they do they may decide not to make an announcement. I understand that most of the loans they have are secured against the current Brazillian mining assets.

I believe they will use the Peru operations to fund themselves for some time. This was producing at around 1600 ounces per quarter and was profitable. I think they will try to increase this production using the current arrangements, which are not ideal but give them a useful cashflow.

Why don't you ring the company to discuss the issues that concern you.

I have no idea if they will go under. My view is that if they can increase production in Peru to around 12,000 ounces per annum then they may be able to limp along for a considerable period. This will continue to be a higher cost operation (see last quarter cash cost of $940/ounce) but still provides a very useful margin at USD1650/ounce.

If they can limp along long enough and they do a deal that allows them to keep the Brazilian operations then if the National Park issues are ever resolved in their favour they could go back and mine there. That is a big if, I suppose.

MUN is not dead yet, but is in deep doo doo until it can gain a useful cashflow.

NB: So far I have been wrong on this company so one should take what I have written with a strong degree of scepticism. I wanted to believe that the access road issues would be resolved a lot sooner and thought they had more ore to mine at Engenho, .. wrong.

loki (Warning: Investing in gold speccies can be harmful to your wealth and mental health.)