Strategy

Monday, 18 August 2008 18:53

We have the right strategy

We are seeking advanced projects in gold and base metals that are in production, or can be quickly brought into production through the completion of a feasibility study and project financing. For properties that are earlier stage we will seek partners to farm-in to those assets. Our selection processes are rigorous, utilising the skills of our Board, our management team and the excellent team of consultants for due diligence. We are able to evaluate opportunities quickly, while at the same time maintaining the high standards of our due diligence.

Key Drivers

The key drivers in the development of our strategy have been:

• Our review of the Indee performance;
• Our understanding of the of the challenges in raising high-risk capital;
• Our review of metal markets;
• Our knowledge of the barriers to entry; and
• Our assessment of short-term and long-term market forces.

Our review of the Indee performance

We undertook a review of the performance of the Indee Heap leach operation. Since we finished mining and stacking ore on the heaps the gold recovery from Indee has exceeded the planned recovery of 68% by 4%. This confirmed that the heap leaching process is suitable process for particular ore types. This excellent performance and the review outcomes have confirmed that projects such as Indee can deliver good returns to our shareholders.

Our understanding of the challenges in raising high-risk capital

The Company’s Board and management maintain regular contact with representatives of the investment community. Our soundings of the investment community throughout the year have clearly established that it is difficult to raise funds for early exploration projects. Investors are sophisticated and are seeking investments based upon traditional measures of cash flows and return on assets. Hence, as a Company, we took the decision to position ourselves as a Company capable of meeting those requirements of investors.

Our review of metal markets

Our review of gold and base metal markets has resulted in confidence that price growth will continue for many years to come. There is demand-led growth in base metal prices driven off the growth in living expectations in the BRIC countries (ie Brazil, Russia, India and China). There is a fundamental shift in supply of gold and many other factors that should lead to increasing prices.

Our knowledge of the barriers to entry

The capital requirements for cost effective scale of operations for bulk commodities are prohibitively large for a small company. However, medium scale base metal and gold projects are well within our capabilities. We therefore focus on these types of projects.

Our assessment of short term market forces

Over the last three to six months there has been a further flight of capital from the junior mining sector. Further, major mining houses are focusing on their own pathways to value for their shareholders as their share prices only reflect the value of their core, long life, high volume assets. We believe that this will result in opportunities for a small company with the right mix of capabilities to realize the value of non-core assets of major mining houses. RNG is well positioned to acquire producing or near producing assets in our area of focus.