Ann: Quarterly Cashflow Report, page-50

It seems that this is how the guys at Macquarie have been modelling it according to your quote from their note.

Although the equity component (if that’s the way it will be done) is dilutionary it derisks the company in terms of potential failures as the company has less chance of being put into serious financial peril (ie administration/receivership) if things start going badly wrong with the build or commissioning etc.....or if something happens “in country” to delay things at a critical time.

I personally think the project is of low enough risk that they should do 100% debt financing and I’ve let Richard know my opinion.

With the equity component and the EPCM model they can reduce the upfront CapEx and the payback time as the debt burden is reduced but they leave shareholders open to share dilution and potential cost overuns. They must have confidence in themselves and the strength of the project to go down this path. Let’s hope they are building a very strong team to manage the build as it’s a very different skill set to exploration.

In the case of GCY’s Dalgaranga Gold Project for example it looks like the mine build was done well but the strength of the deposit is letting the project down. Large initial strip ratios, early sensitivity to material movements and grade reconciliation and probably not a conservative enough feasibilty study.

Sanbrado has a high grade small open pit and high grade UG mine being developed contemporaneously at M1 so the mill will be spitting out gold from day one. Even if they have similar problems to GCY at M5 (which I doubt as M5 is a virgin deposit, unlike Gilbeys) there will be enough gold coming out of the mill so that the company won’t bleed cash IMO and need capital raisings to augment operational cash flow. The chances of seeing a GCY scenario at Sanbrado are very slim IMO.

The risks are more around managing the build and keeping costs under control during the build. There is still lot’s of head room in the current valuation IMO based on a completed project, even factoring in dilution and construction risks. Just a matter of patience and maybe topping up along the way when milestones are being hit.Esh