MIC - Production Forecast to 300kozpa at AGM Gold – US$425/oz next ?

• This comment is based mainly on our attendance at Michelago’s AGM at 3.30pm on 19 Nov 2003 in Sydney, and an update on our viewpoint of the gold price.
• Michelago (MIC) : Rated as a Spec Buy
• MIC gave a calendar year production forecast in its 2003 AGM presentation, in accordance with its target of attaining gold production of 300,000ozpa within the coming 5 years or so, as shown below :
• In response to questions on cash costs, MIC stated that they expected BioGold’s production costs in 2004 to be about US$220/oz to US$230/oz, being based on purchasing concentrates from producers at 55% to 75% of the gold price (depending on what state and type the concentrate is sourced from).
• The driver for MIC’s share price is probably the signing of the SFJV’s. At this stage, the exploration JV’s are expected to be signed before Christmas, and the production such as BioGold after Grant Thornton has completed its due diligence by the end of 2003. Biogold could be approved in March (after the Chinese New Year and the Summer festivals) or May 2004, and any subsequent required financing in JQ04, which has resulted in the production estimate shown in the above figure from about mid-2004 for an attributable 51%. It should be noted that MIC does not have to have the SFJV signed in order to start exploration, from what we can see, a number of other Chinese exposed gold companies are not waiting.