Francisco Gold - FGX.V Message Board

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Gold/Mining/Energy : Francisco Gold - FGX.V

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To: Nexus who wrote (741)	5/3/2000 12:18:00 AM
From: Claude Cormier	Read Replies (1) of 1907

<<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>> The discount rate you use to calculate NPV has nothing to do with the return on investment. It has to do with future expected inflation. You discount at 6% when you expect your cash flows to be worth 6% less one year down the road. Nobody uses 10% this days. It is more 5-6% with a few analysts using 7.5%. The rate of return in the case of El Sauzal is 42%. <<Using a discount rate of 10% would cut the value of the project by at least 25%.>> You are right on this one. It is even more. But again it depends on how the cash flows are distributed over the coming years. <<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%.>> True... so in that case PFG's Luchio is worth very little and PFG stock is way overvalued as it will take 2-3 years for them to drill the 250 holes FGX has in El Sauzal. FGX can be brought into production in less than 12 months if an agressive miners want to do it. <<I think it is for those reasons and perhaps many more that the stock is trading at these prices. That is why I say the market value of a stock is it's true value.>> I disagree. It is for the reasons I explained. A question of promotion and the sort of shareholders this stock has. But this will change in the next month as FGX will now have its website and will add a new board member to help market the company. Results from the drill program starting soon at Marlin will be displayed on the Website. <<To move it, it would require additionnal ounces, a higher gold price or something new that could give the stock more value.>> I disagree of course and I think the gap between PFG and FGX will increase over the coming months...in favor of FGX. <<I think perhaps Marlin might help bring value to this company >> Me think Marlin will do a lot more. It will cause a takeover within 2-3 months. On average, Marlin has grade 2.5 times higher than Luchio with its main zone 4X higher. Infrastructure is 100 times better. So far, only the size is not as large. But the potential is for it to be also very large. I will email you the press release when it comes out. I think we will have an interesting spring/summer comparing the progress and performance of these two stocks.

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