Updated Valuation and SWOT - RSG, page-40

It' meaningful in my opinion.

Investors are willing to pay the value of annual gold production more forward in the case of companies with larger scales of production. An oz of gold production is worth more in a big producer than it is in a small producer and brian's ranges are just an empirical measure of how the market values this. I don't think they are particularly useful scales on a stock specific basis as the categories/ranges he has devised are pretty broad but they do help give him and other investors that look at them an idea of comparative valuation based on the three key metrics of EV, annual production and AISC. It is empirical approach that is useful in my opinion but you need to drill down into company specifics IMO. In the long run reserves, scalability and how efficiently a mine can be built and operated and produce gold are what matter. As per my example with the EKJV, three of the deposits in the JV, Pegasus, Rubicon and Hornet are all being accessed for ore haulage (to and from surface), paste fill activities and UG exploration drilling from one decline. It is pretty hard to mine efficiently and open new stope faces with all this going on and only having access through one decline. Thankfully the grade at those mines is still relatively high at around 6g/t but as these operations get deeper and stopes have to be mined from more lateral levels in the mine (ie further away from the decline), costs will invaribably rise and reserves will invariably get harder to replace.

Look at DCN'a Westralia development for example with a slightly lower reserve grade than the EKJV but the three depoists there are accessed by three declines and DCN are think about building a fourth decline early on in the development. The strike length of Pegasus, Rubicon and Hornet combined is approximately the same at Beresford South, Beresford North and Allanson combined but there are three declines at Westralia instead of the one at Kundana for those three depoists. What does it mean. It means the DCN group of mines will be more effecient, more scalable, ie can open up more simultaneous ore faces, more stopes per developmemt metre.

Looking at broad metrics is all fine but underlying those metrics are physical ore bodies and system of tunnels that end up determining ASICs and a mines growth potential. You can grow production in a narrow veined mine by mining more marginal ore (ie lowering grade) but costs increase as is evidenced by NST's falling grades and rising costs at it same Kalgoorlie operations. At Syama there is potential to grow production by mining more ore of the same grade. The sub level cave mining technique allows any number of lower production levels to be worked up in advance. The limitation is how fast you can blast and bog the ore out of the mine and the number and size of declines (mining openings) is the limiting factor. I recall that they were once talking about an underground conveyor system for Syama. I'd say this idea got replaced by autonomous hauling but there could still be potential for adjunct conveyor systems to increase production in the future. The beauty of Syama is that you can talk about scalabilty because the reserves are there. Esh