"The Grasberg Mine is the largest gold mine... processing capability of 240,000 metric tonnes per day. Twice the size of an optimized L.C. if it was only processing it's own ore."

IMO, the optimized L.C. (the point where the maximum NPV for Kry occurs) is qty 17-20kt/d = 340,000t/d...much bigger than Grasberg.
At this size, 22Moz @ 0.9gm/t will be mined in 6.13 yrs.
Kry's share of the mine cost would be $1080M, amortized over 5 yrs equating to $269M/yr.
For this mine built and producing in 2yrs,
Kry cash flow:
yr3-7... $700M
yr8...... $969M
yr9...... $128M
With 514M O/S, 8% discount rate, $1150/oz gold, $340/oz cost, Kry NPV/sh = $3.48 after 40% Ventax.
Do you think Kry and CRRC are negotiating "optimization" along these lines?
Regards

Here are the cash flow numbers for the qty7-20kt/d modules in my previous post:

pre tax cash flow:
yr3-7 $276M
yr8-14 $399M
yr15 $356M

Regards

"We know from Fung that the plan is to have a mine life of 15-20 years."

If he was talking 22M oz then qty 7- 20kt/d modules will be required. Extrapolating SNC Lavalin's expansion numbers from the report Sept 26, 2005 - "Crystallex Announces Capital and Operating Costs for Expansion of Las Cristinas to a 40,000 tpd Operation", Kry's share of the mine cost will be $490M.

IMO, here is the NPV/sh for Kry, for a buyer, based on these assumptions:

1) 514M O/S...included in this number is 100M shares representing 19.9% KRY that CRRC should acquire as a hedge for assuminmg 100% of the risk of mine construction
2) $34M net note facility debt after CRRC 100M share acquisition credit and KRY existing equipment credit
3) construction cost $300M initial 20kt/d module plus $25M equipment: KRY prorata cost 1/3
4) construction cost $150M each additional 20kt/d module plus $25M equipment: KRY prorata cost 1/3
5) 8% discount rate
6) production start in 2 years
7) $1150/oz spot gold
8) $340/oz mine cost
9) mine cost to be repaid in equal payments from production proceeds over the first 5 years of production at the discount rate

Regards

"why are you using an 8% and 10% discount rate and not including the standard 5% discount rate for Gold resource?"

Here are some recent reporting discount rate examples for gold deposits; I chose 8% and 10% but you can run the numbers for whatever you want.

1.13gm/t is the grade of the Sept 2007 43-101 Proven and Probable Reserves of 464 million tonnes yielding 16.86 million ounces @ $550 gold. The grade would go down as the gold price goes up and more oz are added to the reserves. I did not adjust the grade downward for my calc at 25.5M oz, so the NPV numbers are based on insufficient mine thruput, but I plan to wait for the SNC update to revisit this.

Regards

kimberresources.com/News.aspx?newsid=181
mexico 8%, 5%
vitgoldcorp.com
nevada 5%, 10%
rollingrockresources.com/s/Home.asp
canada 5%
coralgold.com/s/Home.asp
nevada
8% 11.5% 15%
cassidygold.com/s/Home.asp
africa 10%
rusoro.com
venezuela
8%

"Where do you get $2/sh from. 6 bucks was a minimum guesstimate before they had a joint venture, now with the possible JV the company is worth much, much, more."

$2/sh comes from a look at a few NPV calculations, based on an imminent buyout senario, with the 1/3:2/3 JV in place, 60kt/d as the assumed optimal tonnage, with 25.5M oz mined.

IMO,

Regards

"I often wonder if a complete buyout is possible by the Chinese prior to the issuance of the permit. If they have the definitive agreement signed and think the permit is in the bag why not?"

IMO,
the MOC has no value in KRY's hand; evidence: Chavez refuses to issue the Permit to KRY. I certainly don't see Chavez letting KRY have 1/3 ownership and $12 share price going forward as some have suggested. A bid for KRY without the Permit would invoke the Shareholder Rights Plan unless it met Fung's Arbitration target of $2B or $6/sh. The prudent thing to do for the Chinese is to move the MOC to the JV and make a bid for KRY under the terms of the JV, in the $2/sh range. Arbitration no longer applies and if the BOD cannot find a superior offer, the Chinese can petition the KRY Regulator to have the SRP set aside. Chavez will have KRY out and the Chinese full in with the permit conditional on this basis.

Regards