Ann: Research Report, page-2

Hi Andy and all,

The key to this very conservative valuation is:

"Microsoft Word - KRM_240714.doc

• The incorporation of the Splay Vein in the ramp up process may alter the existing production guidance of 40,000 ozs for FY15 given the average grade during this time is expected to be between 8 and 12 g/t gold, providing AISC of US$650/oz.

Despite the preamble on the merits of the Splay vein, the valuation is based on an average grade
between 8 & 12 g/t as if the splay vein were not going to make any contribution. I would like to question
this assumption as follows:
(a) That previous management has said that Talang Santo grade would be likely similar
to Way Linggo because of washout reducing the diamond drill reported grades.
9this was before the Splay vein was qualified)
(b) That development stockpile of 8500 ton has 13 g/t already
(c) That the 8-12 g/t assumption does not account for supplemented feed from the Splay
vein that averages 59 g/t (including silver). All that is needed is to produce 320 ton/day
of normal ore and 60 ton/day from Splay vein to produce an overall grade of 17.7 g/t*
(incl silver)
Cheers
Moorookamick

*................320 ton/day @ 10 g/t = 3200 g
   ..............60 ton/day  @ 59 g/t = 3540 g
Total.........380 ton for 6740g or an  average of 17.737 g/t
380 ton/day is the plant nominal throughput capacity without the $2mil upgrade which
would then take throughput to 500 ton/day (182,500 ton/year)
It is understandable that the new CEOs tend to be conservative so that they can take credit
for improvements later but I guess that the Sept Qtr report will qualify things better.
mm