via Stockhouse.com

Mining costs at GBN.V are within the world average of mining costs per ounce of gold. How do you come up with a per-ounce figure of costs? Why does the company refuse to address how much it costs to mine?

http://www.virtualmetals.co.uk/pdf/ABNGCQ111.pdf

The way to go about figuring it out for yourself is as follows. You take the sum of all the reported cash from operations over a year. If you assume ~$8m. as the cash from operations of Q4 and add that to the total of Q1,Q2,Q3, you get ~$30.24m. for the year.

You take ~$30.24m. and divide by guidance on production of 45koz., you get $672/oz. in cash costs. The IFRS accounting number might differ dramatically from this result and obfuscates the actual cost to mine. The company says $900/oz. cash costs.

The company generated ~$52.69m. in revenue in the first three quarters. So you have $23m. left over after costs. For the end of the year, cash flow above costs could be as much as ~$43m. Minus taxes, investments and long term liabilities in the form of the deficit.

If you look at it another way, this more than enough to cover cash from operations for the entire 2013 fiscal year@ a production rate of 45koz. The increase to production is 70koz. per year starting Q1. If you take 70koz. per year and multiply by $900/oz. cash costs, you get a total of ~$63m. in costs for fiscal 2013. You need to add ~$20m. to cover the costs.

This was accomplished through the Waterton financing.

In order for GBN.V to cover further advances in production, such as to 100koz. per year without having to finance, the average realized gold price per ounce during fiscal 2013 will have to be $2185/oz. (although, if it really turns out that costs are more like $627oz., then average realized gold price needed for 2013 will be closer to $1522/oz. We are averaging $100 CDN above this price already.

So if you buy shares in GBN.V, then you are betting that they will get their average realized price for fiscal 2013. If gold prices break out, then I would say its a no-brainer.

Its pretty clear that the Waterton deal is meant to cover bases lest the gold price fall further.

http://www.bloomberg.com/quote/GBN:CN/cash-flow

Deficit

The Deficit generated by GBN.V in starting up the mining project was accumulated during fiscal 2010 and 2011. There is a location in the Bloomberg website that tallies the deficit. You look under what they call 'retained earnings' which is a negative number.

http://www.bloomberg.com/quote/GBN:CN/balance-sheet

Short Position

GBN.V short position is being hacked on the Bloomberg website, because the numbers have become astronomical. I would go with the original number that 65% of the float is held short in an equity swap.

They merely multiplied 65 X 18 to get above 1100% of the float so as to make it appear that the short position is huge, (65, the actual percentage of the float held short, and 18, which comes from .18¢) and now resort to throwing in the arbitrary number of 11,000 with no percentage symbol.

Really amateurish hacking.

They resorted to the same hacking of GBN.V's financial reports on-line.

http://www.bloomberg.com/quote/GBN:CN/key-statistics

-F6