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: Ron Everest who wrote (424)	6/27/1999 10:02:00 AM
From: Exsrch	Read Replies (1) of 48092

Ron, Your fears of "gold really tank(ing)" is my fear. Let me be specific. You mention $200 dollars; however, ABX told us exactly the dollars amounts to focus on: - Weigthed Average total production cost (fixed cost+veriable cost) - Weighted average cash cost (fixed cost) In reality we would have a safety margin below those numbers but I would not feel comfortable at that point. The margin of error for safety comes from three things: - Cantango (abx would have to invest in higher beta instraments if spot moved seriously below total production costs. I'd be on the phone daily to investor relations at that point) - Money and credit in the bank - Increase production as long as spot is above cash cost so that veriable cost will clear a profit Lets hope we don't go there. And it is unlikely because ABX's competitors would completely shut down before ABX reaches that point (I hope). At that point ABX should stop borrowing gold. If it does not I would start worrying. You also said: <<... It would also be another certainty that ABX would have the credit status to sell forward another 12 or even 20mm ounces and take care of many more future years of production...> Though I would agree with you that ABX has the ability to sell 12-20 million ounces forward it might not be a good risk. I'd like to see AU price flirt with total production cost which would give ABX the ability to buy NEM or PDG (prefer NEM) at fair price. Because the probability of gold rising over the long term is so high (historically speaking) this would position them with a balance portfolio of reserves (half of production sold forward and half avaliable at spot). This assumes ABX doubles in reserve, revenue, production with a modest increase in profit (due to increased capex, exploration and debt service). Cheers, Exsrch

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