Fair value market cap analysis?, page-87

Hi Chayanne

I think most of the potential production zones for AUL are a 50/50 bet between economic and uneconomic.

In my experience with these types of underground gold mines one needs between 6 and 10 grams per tonne head grade (the grade reaching the surface and fed to the process plant). That range is dependant on haulage distance (from face out along level and up shaft).

The 50/50 thing is because you can kill the economics by drilling too much so historical experience in each mine defines the optimal drill spacing. That’s where the average multiplier of drill grade to production grade comes in. More dense drilling might provide more accurate drill grade but not when the zones are extremely nuggets.

Traditionally these mines drill into known structure, drill about 30 holes, and if a few hit high grade then go mine the entire zone and then compare the average grades.

2 miners will develop and extract a working place and you might have 2 working places per zone. In 0.5m thick quartz they can produce 7000tonnes per year per 2 man team so you can do calcs.

To improve the 50/50 odds I like to see 3-6 different zones being mined. Say 2 in Morningstar, 2 in RoD and 1 in Wallaby.

Also I would like to see some discussions with A1 around toll treating their ore - seems obvious.

Finally we could easily do desktop study of regional prospectivity of the massive exploration areas.

Finally I want to see desktop study of the MStar deeps potential and method and costs to access.

All of these could at relative low cost be desktop studied and a grand plan announced.

If that were announced I would then want to see a capex and funding plan presented. I would offer a Rights/Sophisticated Placement plan offered to current AUL shareholders plus the old MCO holders of record.

A once off $4mill raise offered at 10% PREMIUM to 6mth VWAP would actually succeed I reckon.

I would buy into that.

Krum