A response from Mark Bojanjac to a couple of questions I put to...

A response from Mark Bojanjac to a couple of questions I put to him yesterday, for your info,


Thank you for your enquiry.

Exploration
This has always been core business for Adamus. We are one of the rare instances where the discoverer goes on to mine the ore. They are very different businesses albeit linked.

We have an initial US$5M budget for exploration concurrent with the build of our new CIL plant scheduled for completion first quarter 2011.

This is intended to:

1. Drill early stage free milling mineralisation which was discovered from our own soil sampling programs but not yet extensively drilled. This would be suitable for our new CIL plant.

2. Conduct specialised testwork on the fresh sulphide at Salman which is not optimal for the CIL plant. We are about half way through this testwork. If successful, it would demonstrate that we could economically produce a sulphide concentrate with a separate flotation circuit and truck it to a nearby Bio oxidation plant. This is significant because we believe we have a large amount of this material which to date has been ignored. Our northern neighbour is a US$1bn company with a suitable biox plant with capacity for such concentrate.

3. Drill up significant quantities of Salman sulphides subject to this testwork.


Hedging
We have hedged around 25% of our proven reserve at US$1075/oz.

75% remains unhedged so we benefit from 75 cents in every dollar the gold price rises above US$1075.

On the downside insurance afforded by hedging we project comfortable debt repayment within 2 years of operation even down to a US$800 gold price.

The hedge represents deliveries of physical gold representing about half our annual production in the first 5 years.

Were we producing and selling gold at today's US$1250/oz price we would net around US$1160/oz during the hedge delivery period. Beyond that we would 100% (benefit)at the then gold price.

Significantly, our projected operating costs are around 1/3 of the current gold price. This leaves 2/3 of our production initially stored in bullion in a Swiss metal account. We could choose to sell that bullion for any currency at any time to take advantage of gold price swings. Indeed we could also deliver the hedge commitments early if we so chose. Initially we envisage selling it for cash and retiring the debt within the first year of full operations.

You are correct that more exploration will reduce the effective percentage of the hedge. Bear in mind also though that our reserves were calculated at a US$900 gold price. Economics at the current price will yield a bigger reserve on its own.

Pure explorers are years away from that real world flexibility and in fact the current gold price is largely academic to them or an investor.

I hope this helps your understanding.


Please call at any time to discuss.


Cheers

Mark Bojanjac
Managing Director & CEO