Pacific Rim Mining V.PFG Message Board

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Gold/Mining/Energy : Pacific Rim Mining V.PFG

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To: Nexus who wrote (13149)	5/25/2000 11:27:00 PM
From: Claude Cormier	Read Replies (1) of 14627

<<... but you MUST discount the total calculated value of the project from today until the cash flows begin...>> I disagree. If El Sauzal (or any other deposits) has a $100 millions NPV today it will maintain a $100 millions NPV until someone starts developing it to produce the gold. Until it is sold or FGX starts developing itself, the only variables that will affect its NPV is the price of gold and inflation. If a third party buys out El Sauzal in 5 years from now, with gold still at $270, it will pay a very similar price it would pay today, no matter if it is 5 years futher in time. Why? Simply because, this company will get the same cash flows during the LOM in 5 years from now. <<For example, if you had a choice to receive $1 million profit (discounted value) from a project that starts today and ends 2 years from today or receive $1 million from the same project that would start 10 years from now and finished 12 years from today, which one would you pick.>> The first one of course. And if you say that for Francisco it is much better to sell El Sauzal now at $150 millions than keep it idle for 10 years and sell it then at $150 millions, you may be right or wrong. This is a gold deposit not cash. Its NPV fluctuate with the price of gold and is highly volatile. I can make a case that gold is much closer to a bottom than it is to a top. The likelyhood is that the NPV will grow with the price of gold in the years ahead. Therefore, 2 millions ounces of gold in the ground that can be mined at a cost of US$85 is potentially a lot more valuable than $150 millions of fiat paper. <<Have you?>> Yes. And this is why I have a lot more FGX than PFG. With FGX, I know I can't lose.

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