Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG Message Board

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Gold/Mining/Energy : Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG

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To: Wade who wrote (422)	6/26/1999 7:34:00 PM
From: Exsrch	Read Replies (2) of 48092

The beauty of buying ABX LONG is that gold spot doesn't really matter. With an average price of $385 for every once sold for the next three years ABX's earning will have no sensitivity to gold spot price below US$385. Above $385 there will be additional transaction cost but very little impact to overall earnings (this gets a little complicated). ABX earnings will be more sensitive to depreciation, amortization, capital expenditures and M&A activity. Coincidentally, these expenditures make ABX operationally stronger. Reduces cash and total cost with respect to peer companies. However, I would agree that investors currently in ABX treat it as if gold price is tied to what the company earns. No matter, you have to have faith that the market will reward true value adding earning in the long run (hope investors outside of gold see ABX as a growth and value firm and invest in it defensively). No reason to be bearish if you can understand the economics of ABX's earning potential in the long run no matter where the price of gold goes. Although Buffet's investment in ABX would be a great boost I know for myself that ABX is a great investment. Don't need his investment in ABX to make me comfortable. If you have invested in ABX short term via trades than I can understand your bearishness. Short term volitility in price can give you a good spanking. In the long term I would look to ABX having a lower beta and a premium multiple compared to its peers (because of consistent earning and predictable revenue growth). Look at the evidence: - Currently has $500 million in cash and on track to have a $1 billion by december - Line of credit of $1.5 billion dollars (total cash hoard of $2 Billion) - Capital expenditure of $500 million per year all funded from internal cash flow - For all purposes debt free - Conservatively managed balance sheet - while competitors suffering negative cash flow, reducing exploration, reducing output (revenue reduction) and laying off. I would say invest in ABX because it is a great company, first, with rock solid predictable earning for the next three years (think of it as investing in GE/Coke/Gillette). Than put a smile on your face knowing ,IF, there is a monetary demand for gold that you are going to benefit/protected from market chaos. Cheers, Exsrch

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