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Gold/Mining/Energy : BRE-X, Indonesia, Ashanti Goldfields, Strong Companies.
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To: Method who wrote (7347)3/18/1997 8:00:00 PM
From: Gerald R. Lampton   of 28369
 
>A Freeport takeover would not be such a bad thing.

I'd have to see Freeport's production costs per ounce of gold to make a definitive judgment, but Freeport, like any other potential acquirer, would, I think, have a difficult time of demonstrating that an acquisition would not dilute the net operating cash flow per share of Bre-X' shares. Any deal which dilutes the net per share operating cash flow of Bre-X would, in my opinion, not be in the best interests of Bre-X shareholders, as it would tend to dilute the real value of their shares. Now, maybe people might be willing to pay more per dollar of cash flow for Freeport stock than for Bre-X stock, I don't know. But any such willingness is not rational and therefore is not likely to endure, IMHO. So any buy out that dilutes the net operating cash flow per share is a bad deal, IMHO.

A quick share price appreciation which results from a bad buyout deal is not a good thing, IMHO.

I also question the value of dividends. Dividends get heavily taxed. Capital gains do not. Other things being equal, I'd rather see Freeport or anyone else use excess cash to buy back stock.

I continue to think a buy out is not a viable option because I do not think any competitor of Bre-X can afford to pay what the company is really worth.
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