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Gold/Mining/Energy : Twin Mining (formerly Twin-Gold) -- Ignore unavailable to you. Want to Upgrade?

To: WillP who wrote (208)	2/6/2002 4:39:28 PM
From: VAUGHN	Read Replies (1) \| Respond to of 613

Hello Will I agree the limestone raft in Freightrain will increase stripping ratios over optimum levels for a 15 hectare pipe, and the pipe is not a perfect carrot in shape, but as you know, few large pipes are. Looking at the pipes Debswanna mines is a clear indication that almost every pipe has some anomaly whether its shape, cross cutting basalt dykes, county rock rafts, water infiltration, etc. DeBeers pipe in James Bay at .333 carrats per tonne has a very similar shape and size to Freightrain and significant water infiltration problems. 5024 has a huge granite raft between its two diatremes/lobes. Every kimberlite has crustal and mantle xenocrysts throughout the ore diluting grade so having a more identifiable and exercisable central raft of soft limestone is not unique nor necessarily onerously diluting and certainly relatively easily removed compared to granite. Bottom line is that stripping ratios and trucking costs for a 15 hectare pipe will be lower than for 8 one & two hectare pipes many kilometres apart, and limestone is a whole lot less expensive to strip than granite. I came across the following that may assist our discussion. In 1999, Ekati sold production for an average price of $247 per carrat. nnsl.com The following is from a recent Diamet Quarterly report: During the first quarter of 2002 Ekati produced 924,000 carats of diamonds, almost all from the Panda Pit as compared to 732,000 carats in the comparative period last year. During the first quarter of 2002 Ekati sold 522,000 carats of diamonds at an average price per carat of US$165 as compared to 443,000 carats at an average price of US$170 in the comparative period last year. Approximately 58 percent of Ekati production is sold through its Antwerp sales office, thirty five percent is sold to De Beers and the remainder is sold at Ekati’s Yellowknife sorting and valuation facility. During the first quarter of 2002, the Company’s 29% share of diamond sales was $37.7 million as compared to $33.0 million in the comparative period last year. During the first quarter of 2002 the Company’s share of earnings from these sales before interest on the mine financing and income and resource taxes was $25.6 million as compared to $22.1 million in the comparative period last year. The difference between diamond sales of $37.7 million and equity in earnings of $25.6 million represents the Company’s 29% share of cost of sales. Ekati uses full absorption costing, whereby all costs are rolled into inventory as incurred and then into cost of sales on a units of production basis as inventory is sold. During the first quarter of 2002 Dia Met’s 29% share of cost of sales before depreciation, amortization and depletion at Ekati was $9.3 million as compared to $8.1 million in the comparative period last year. Amortization and depreciation for the first quarter of 2002 was $2.8 million, the same as in the comparative period last year. Cash cost per carat sold was approximately $61.50 during the first quarter of 2002 as compared to $63.17 during the comparative period last year. Non-cash costs per carat were $18.20 during the first quarter of 2002 as compared to $22.60 during the comparative period last year. The improvement relates principally to an increase in the number of carats produced per tonne of ore processed. Ekati’s cash and none cash costs per carrat appear to total $79.70 per carrat. Based on the previously quoted realized price of $247 per carrat, I interpret the $165 per carrat price to be net of the aforementioned costs. This seems to be confirmed in reviewing data in BHP’s Annual Reports. This is very rough of course but using Ekati’s numbers of $247 & $79.7 and the grade I suggested of say .225 carrats per tonne, one can extrapolate a high net revenue of $37.64 per tonne. At a high production of 28,000,000 tonnes per annum that suggests net revenue of $1.054 billion. Assuming 40% share realizes $422 million or $5.47 earnings per share. Taking a more conservative gross value of $150 per carrat & Ekati’s high $79.70 per carrat (costs) and a lower grade of say .190 per tonne, an extrapolation produces net revenue of $13.37 per tonne. At a more conservative production rate of 14,000,000 tonnes per annum that suggests net revenue of 187 million. Assuming 40% share realizes $75 million or $0.97 earnings per share. Considering the life of the mine would be a minimum of 25 years applying a PE ratio of say 8 suggests a potential share value of between $44/s & $8/s. So something in between might be reasonably anticipated. In the ball park? Regards Vaughn