Ann: Commsec Investor Update Presentation, page-9

Hi barret81

You ask a tricky question .. I take a holistic approach when it comes to investing in small oilers and gold miners.

To answer your question without writing an essay I simply assess a) the market cap and b) enterprise value as compared to free cash flow ( rather than operating cash flow).... if a) is less than 3, and b) is less than 5 then the company grabs my attention.

For ELK at its current share price, when Grieve is in full production in calendar 2018 a) will be 1.5 - 2 and b) will be 4-5.

I use a MC/FCF ratio of 4 as fair value so on that simple basis FV for Elk is 14-18 cents IMO

In all honesty if that was all I wouldn't have invested in ELK , however , the fact that Brad Lingo is the new MD , considering his history with Sunshine gas and Drillsearch and the way he grew the companies, the quality of Grieve and now Madden as long term assets when developed ( Grieve) will need little capital expenditure, the reserves being primarily proved developed , the company growth plan using the significant free cash flow to repeatedly acquire EOR capable fields ( thus having no need for exploration expense) etc .....

lead me to believe that this company will be valued at many multiples higher than it is now

Hope that kinda answers your question.

Cheers

Dan