Ann: Gwalia Mass Extraction Feasibility Study, Guidance & webcast, page-173

looking at the announcement,

The following seeks to approximate / calculating what it means for forecasted future revenue and forecasted margin / profit 2019 to 2022.

Firstly the business was looking at the hoist model (table 1) , but it gave forecast on non-hoist model (table 2) and has subsequently given new guidance in this announcement.

Therefore, in calculating some approximate numbers.

One has to calculate first what are the changes resulting in moving from Table 1 to Table 2
(hoist model to non hoist models ) than expected since the plan was released in early 2018 but having been expected in since 2017

and then calculate second what are the changes from Table 2 (non-hoist Model) to new guidance just released to get a grip on what has actually changed in terms of potential future revenue and potential margin/profits from FY 2019-2022

In table below, there are two models forecasts

Table 1, the 5 year expected plan using hoists
Table 2, the 5 year plans no hoists




First thing to note,

• Gold production forecast for 2019 and 2020 on both models are the same, hoist , no hoist 250K(2019) and 240K (2020)
• ASIC forecast for 2019 and 2020 on both models are the same, hoist, no hoist 920 (2019) and 930( 2020)
• Therefore, abandoning the hoist model for 2019 and 2020 means both models will change the same following the new guidance
• So the changes to forecast revenues and reductions in profits as a result of this announcement are simply the difference between Table 1 or 2 (they are the same for 2019 and 2020) and the new guidance and calculated below

Revenue reduced from expectations after this announcement for Gwalia by at least $23M using Gold price of 1840 AUD/ OZ in Fy 2019

Margin / profits contracted after this announcement for Gwalia by at least $11.875M following guidance that ASIC was now set to increase by $50 from the lowest costs range in FY 2019

Calculated as follows

	Column 1	Column 2
0	FY	2019
1	Production	GWALIA
2	Old production At Midpoint	250000
3	FY new production guidance at Midpoint	237500
4	Difference	-12500
5	Current Gold Price / hedged gold price	1840
6	Reduction in forecast revenue with new guidance	-$ 23,000,000
7
8	costs
9	FY 2019 at the lowest forecast	930
10	FY new guidance	980
11	Difference in costs (increase)	-50
12	new Guidance	237500
13	Increase Decrease in Margins expected	-$ 11,875,000

Simberi 2019 guidance for 2019 was also changed. The net affects of upward revised production and lower guided ASIC for FY 2019 are

Simberi New guidance for FY 2019 will increase revenue expected by using the hedged price of Simberi production at 1750 AUD by 13.125M and that margin/ profit following the downgrade to costs will improve by 3.975M

These figures are calculated as follows

	Column 1	Column 2
0	FY	2019
1	Production	SIMBERI
2	Old production At Midpoint	125000
3	FY new production guidance at Midpoint	132500
4	Difference	7500
5	Current Gold Price / hedged gold price	1750
6	Reduction in forecast revenue with new guidance	$ 13,125,000
7
8	costs
9	FY 2019 at the lowest forecast	1275
10	FY new guidance	1245
11	Difference in costs (increase)	30
12	new Guidance	132500
13	Increase Decrease in Margins expected	$ 3,975,000

Net affect of FY 2019 revenue and net reductions for Gwalia and Simberi

REvenue changes and Net margins hanges from forecast following these changes in guidance from the announcement

FY2019 revenue will be net $9.875M lower
Fy 2019 margin / profit will be at least $7.9M lower than expected from forecast

The changes are calculated as follows

	Column 1	Column 2	Column 3	Column 4
0	FY	2019	2019	2019
1	Production	GWALIA	SIMBERI	totals
2	Old production At Midpoint	250000	125000
3	FY new production guidance at Midpoint	237500	132500
4	Difference	-12500	7500
5	Current Gold Price / hedged gold price	1840	1750
6	Reduction in forecast revenue with new guidance	-$ 23,000,000	$ 13,125,000	-$ 9,875,000
7
8	costs
9	FY 2019 at the lowest forecast	930	1275
10	FY new guidance	980	1245
11	Difference in costs (increase)	-50	30
12	new Guidance	237500	132500
13	Increase Decrease in Margins expected	-$ 11,875,000	$ 3,975,000	-$ 7,900,000

From the announcement it is also possible to calculate and approximate the further future reductions in revenue expected and reduction in margins/ profit from the Gwalia operations in the years 2020, 2021 and 2022

As stated above, there was no difference in expected production at Gwalia in the hoist no hoist models in FY 2020, therefore its a once step process to work out the expected changes to future revenue and margin./profit expectations following this announcement.

Revenue for FY 2020 at Gwalia using closing price of Gold at date of announcement $1840 AUD/ OZ is now potentially going to be at lease $55.2M lower that originally expected.

(note if you had higher AUD gold price in your model it would be even worse)

margin/ profit in FY 2020 at Gwalia could be potentially be lower than first expected if you use the current ASIC now guided VS the 2020 by $10.5M

These amounts are calculated as follows

	Column 1	Column 2
0	FY	2020
1	Production
2	Old production At Midpoint	240000
3	FY new production guidance at Midpoint	210000
4	Difference	-30000
5	Current Gold Price / hedged gold price	1840
6	Reduction in forecast revenue with new guidance	-$55,200,000
7
8	costs
9	FY 2019 at the lowest forecast	930
10	FY new guidance	980
11	Difference in costs (increase)	-50
12	new Guidance	210000
13	Increase Decrease in Margins expected	-$10,500,000

Revised Revenue calculations 2021 and 2022 Gwalia.

There are major differences to the expected production at Gwalia in 2021 and 2022 using the hoist no hoist models
So to estimate what has happened to future revenue and margin/ profit at Gwalia following the announcement, models using the Hoist model had to adjust first to the forecasts using the no hoist model., and second once recalculated to the no hoist model the models had to be adjusted to the new guidance.
So first adjusting from hydraulic model to non hydraulic model saw a drop of 20000 (FY 2021 ) and 50000 (FY 2022) OZ from future expected production
Then following these lower figure forecast productions at Gwalia, the new guidance is for 230K production per year, representing an additional drop from the non hydraulic model of 30000 (FY 2021) and 10000 (FY 2022). So the total expected drop in forecast production from 2021 and 2022 moving from hydraulic to non hydraulic models and then referenced to the new guidance is 50000 and 60000 OZ
Therefore approximate estimates for drop in revenue at Gwalia in 2021 from expectations following the announcement is 92M
Approximate estimates for drop in margin/ profit from expectations is lower in 2022 by $110M

These figures are calculated as follows:

	Column 1	Column 2	Column 3	Column 4	Column 5
0	FY		2021`	2022
1
2	production with hoists forecast Table 1		280000	290000
3	Move to
4	production without hoist forecast Table 2		260000	240000
5	production change difference moving from hoist to no hoists	Oz diff	-20000	-50000	Step 1
6	Move from no hoist Model (table 2) to new production guidance
7	production now guided		230000	230000
8	new guidance forecast without hoists		260000	240000
9	difference from new guidance with no hoists to new forecast		-30000	-10000	Step 2
10
11	total change in production forecast moving to no hoist model and new guidance to model to new guidance	to OZ diff	-50000	-60000
12
13	Using Gold Price for illustration		1840	1840
14	Total revenue change moving from hoist to no hoist model VS new guidance		-$92,000,000.00	-$ 110,400,000.00

Note uses the closing price of gold at time of announcement at 1840USD/ OZ
If the models being used by others had higher forecast AUD gold prices in 2021 and or 2022, the potential lowered revenue from what was expected would be worse.
EG if you had say $2000AUD / Oz in your model for 2021 and 2022, then your expectation would fall by and additional 8M and 9.6M respectively
Margin / Profit expectations changes 2021 and 2022 Gwalia following announcement.
There are major differences in ASIC forecast in the hydraulic and non hydraulic models
First step in seeing the changes to margins profit expectation in 2021 and 2022 is to calculate the difference in ASIC in each model.
Differences in ASIC forecast moving to the non hydraulic model are

• FY 2020 720 to 920 and increase in ASIC of $200/Oz moving from hydraulic to non hydraulic models
• FY 2021 650 – 880 and increase in ASIC of $230/Oz moving from hydraulic to non hydraulic models

So straight away, moving to the non hydraulic model saw expected margin/ profits shrink by -$46M AUD in 2021 and 52.9M in 2022 to what was expected

If you then look at the current guided ASIC /OZ 980AUD/OZ and compare that to the non hydraulic model, you see a further potential contraction in margin / profits per ounce of $60 (2021) and $100 /OZ increase in 2022.
Using the current known figures after moving from the original costs model and todays ASIC guidance of 980 , margin following this announcement could potentially contract vs forecast based on original plan at Gwalia by $58.8M (2021) and $75.9M (2022)
The above are calculated as follows:


Conclusion
Falls in revenue changing from Hydraulic Model ot non Hydraulic Model and then to new forecast from guidance total approximately $267M AUD FY 2019-2022
Potential Reductions in margin/profit now expected / forecast based on new guidance total approx. $154M AUD FY 2019-2022
The above are calculated as follows:


These are large $ changes imo to what was expected and built into models from the original Gwalia Extraction Plan in February 2018
If gold price for any of the futures years used higher than the flat closing price last Friday of 1840 AUD per ounce used in the above , the change to expectations for revenue would be an even larger drop.