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Gold/Mining/Energy : BRE-X, Indonesia, Ashanti Goldfields, Strong Companies.
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To: hugh thorne who wrote (7350)3/19/1997 2:38:00 AM
From: Gerald R. Lampton   of 28369
 
>I think any declines in cf/sh would be more then offset by the increase in the market
>multiple attainable by a major operating company.

I certainly do not disagree that this would occur in the short run. However, in the long run, the current fashion of paying higher multiples for producers than for non-producers may not last.

A rhetorical question:

If the ch/sh of two companies is the same and one (the producer) has a boatload of capital expenses while the other (the passive stakeholder) can kick back and let the cash roll in without having to worry about replacing expensive capital equipment at inflated prices and dealing with the escalating wage demands of a work force, why should the market necessarily afford a higher multiple to the former than to the latter?

The best deal, of course, is one where the whole merged entity is greater than the sum of its parts.

But, in any event, I think the best measure of the value of any deal is whether the true underlying basis for the value of any stock, net cash flow per share, has been altered to the advantage or detriment of shareholders.

>This ability for an acquirer to
>more or less pull themselves up by their bootstrings leads me to conclude that a
>buyouy is highly probable.

I respect your opinion, and you may turn out to be right.

You previously mentioned Teck as a potential acquiror. How do you feel about their prospects now? Apart from a favorable recommendation from Hasan, what does Teck have to offer the shareholders of Bre-X?

Have any other potential acquirors crossed your radar screen?
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