increased production costs, page-2

Goarmy,

The 5% increase in production costs/oz at Engenho Mine was explained in the March Activities Report, which I have pasted below.

"The March 2011 Quarter has seen the head grade fall below the budget of 2.9g/t mainly as a result of excessive dilution from one level of mining. This has been rectified by management in the current Quarter through the use of longer cable bolts (up to 9m vs. 3m) with results to date indicating that the dilution has come back in line with budget. In addition, the 24 hole drill program underway is assisting with mining accuracy of the ore development drives on the lower most levels."

The head grade in the March quarter was 2.44 g/t. If management has now increased the head grade to their budgeted 2.9 g/t, we should see production costs fall. This is assuming that their statement "This has been rectified by management", is factually correct.