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Gold/Mining/Energy : Francisco Gold - FGX.V
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To: Claude Cormier who wrote (733)5/2/2000 7:03:00 PM
From: Nexus  Read Replies (1) of 1907
 
Claude,

Thanks for the detailed analysis of the assets of FGX. It is appreciated. Everything you say makes a lot of sense and confirms that FGX has a certain value. I just have two comments on it.

1. The discount rate is low at 6%. I would use a much higher discount rate in the neibourghhood of 10% since I expect a much higher return on investment than 6% if I invest in a mine. Using a discount rate of 10% would cut the value of the project by at least 25%.

2. The NPV of a project is calculated if the project started right away. That does not seem the case here. Every year the project is delayed, the NPV diminishes by at least 5%.

I think it is for those reasons and perhaps many more that the stock is trading at these prices. It all depends how you see the numbers. That is why I say the market value of a stock is it's true value. It's a balance of supply and demand according to the information that is known. One person's undervalued stock is another person's overvalued stock.

To move it, it would require additionnal ounces, a higher gold price or something new that could give the stock more value. I wouldn't count on it being so undervalued (although it does have some value) and for a buyout offer that might never come to push it up.

I think perhaps Marlin might help bring value to this company and perhaps, if it offers a good chance of high enough returns, it may attract investors like me that are looking for a good play. Care to share what you know about it?

Nexus
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