Michelago Limited (MIC) – MIC Finally Receives its BioGold Approval!

• On 4 July 2005, MIC announced that it had received its BioGold SFJV approval from the Chinese Government, and expects to transfer and take over 82% of the BioGold assets within the next 30 days (by the end of July 2005). The approval process ultimately occurred, but there were more steps and time to complete the transaction than originally envisaged. MIC has consequently now received all of its approvals, for BioGold and for the acquisition of 47.5% of Gold Ridge and transfer of its ML to the Australian Solomon Gold (ASG) consortium.
• Michelago currently appears to be well undervalued in the market at 5.6Ac, and with an NPV (at 5%) of A$0.21 at a gold price of US$425/oz and A$/US$ exchange rate of 77USc. This is based on assuming that MIC exercises its option to increase its equity in BioGold to 99% by October 2005 for Rmb10m, and that the 15Ac options are converted in 2007, (which results in 864m shares in issue in 2007).
• With an attributable 70,000ozpa for 10 years from 47.5% of Gold Ridge and 99% of BioGold’s 170,000ozpa (omitting the refinery production as too marginal). MIC could attribute ~240,000ozpa of production by the end of 2006. Should the 80,000ozpa expansion of BioGold be completed in 2006, then production could increase to ~320,000ozpa, with the potential to achieve higher production levels when BioGold attains its rated capacity and/or Gold Ridge treats higher grade ore.
• The ASG consortium’s acquisition of Gold Ridge has been based on 2.3moz of resources and 1.7moz of reserves as at 30 June 2000 (at a gold price of A$450/oz), with initial production commencing in the second half of 2006 at an average production rate of 150,000ozpa for 10 years with cash costs of US$235/oz.