Over our investment horizon we expect spot gold prices to improve from current levels. However, we also expect the rand to appreciate strongly against the US dollar, which will lead to a fall in the company’s rand gold price realizations in 4Q 09 and FY 2010. Furthermore, although we expect the dollar to recover against the rand in FY 2011, US dollar-denominated gold prices are expected to decline, leading to a further y-o-y fall in rand gold price realizations. Nevertheless, we anticipate growth in production volumes during FY 2011, which should support revenues. Coupled with a fall in per-unit cash costs, we expect volume growth to reinforce margins during FY 2011. There should be a positive trend over the longer term as well, considering the company’s forecast for growth in gold production to 2.2 mn oz by FY 2012. Moreover, the company is debt-free, and we therefore remain optimistic about its financial position. On balance, taking a 6-12 month investment horizon, we believe the company is fairly valued at current levels.

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