Dumped? But why...?, page-8

Fangk

There is some explanation for the difference in the last quarterly report where forward guidance was given - perhaps you have read that, see

http://www.asx.com.au/asxpdf/20160719/pdf/438ns58lf7pwch.pdf

I think it also stems from the company being conservative about its production forecast. Last year they produced 386k ounces but the forecast for this year is 340-370k, so costs are averaged out across fewer ounces and hence cost per ounce is higher, if all else is the same. They have been fortunate in being able to find high grade ore shoots that have raised their ore grade and production at Gwalia, but since they can not predict them they do not include this factor in their estimates. Simberi will continue to be a higher cost operation (around SLR's sort of level) into the future, and a lot of its costs are denominated in USDs, so Simberi does not get the full benefit from a falling AUD.

I suspect that around $4 NST is the better buy because it has more of a growth story and plenty of cash on hand. I expect they will do some deal/s and/or develop the Tamani project to get back production at around 600k ounces pa.

SBM will effectively become cash positive (ie cash on hand being greater than debt) in November, but they will have to set aside $200-250m in the next 2-3 years to undertake upgrades at Gwalia to access the deeper ores and to upgrade facilities at Simberi to be able to process sulphide complexed ores. They are beginning to look for other opportunities since they have a very strong cashflow which will easily cover their planned capital expenditure and provide a strong surplus.

loki