Barrick Gold (ABX) Message Board

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Gold/Mining/Energy : Barrick Gold (ABX)

ABX 7.765

+6.4%

3:59 PM EST

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To: Ron Everest who wrote (1269)	6/24/1999 11:25:00 PM
From: Exsrch	Read Replies (1) of 3558

Ron, I think diversification is a possibility for ABX; however, if I were a board member I would argue for greater focus on the gold business for now. Earn a premium multiple first and when there is no where else to invest in gold or related companies than branch out. why? - There is tremendous opportunities to aquire assets without a large premium (assuming again that gold stays low for several quarters) - I would want ABX to maximize return on each additional dollar of Capital Invested. I think this can be best achieved by leveraging off balance sheet assets and earning cantango (thus increasing long term shareholder value) instead of diversifing. I think this creates certainty and reliability of earning, cash flow etc. If they diversified I think we would both be hopeful for their success but unsure of how it would impact results, thus DCF of future earning would be lower. - There is an opportunity for ABX to become a dominating force in the gold market and leverage this domination to become a growth and value company no different than Birkshire Hathaway. This will take some effort to consolidate the gold market first and than earn a premium multiple (P/E of 35-50) where by diversification becomes easier to execute (why would anyone go public themselves if you could trade your company for shares in ABX with a 35+ P/E. Unless your a dot com). If I had a look into a crystal ball, this is what I would like to see: - Barrick buys NEM (or other lower cost producer who are not hedged) immediately sells all future production (1,2 or 3 years of it) creating another $4 billion asset (off balance sheet) from which they net another $200 Milllion a year. - Doubles earning, increase capex to $1 billion - More players short gold putting downward pressure on gold. - Marginal players start reorganizing in bankruptcies - Choicest projects come to ABX. They also acquire the best in class producers - A brave new world where the loser is the investor who bets on an increase in gold and the winners are those who invest in superior companies that can increase shareholder value no matter the gold price. I would say diversify, Yes. But lets wait until we run out of cheap and good investments in Gold. Maximize our cantango and earning. Make sure we have premium multiple than go after ripe pickings. Your thoughts Ron? Cheers, Exsrch

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