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Gold/Mining/Energy : Gold and Silver Mining Stocks

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To: goldsheet who wrote (580)	2/10/2001 1:05:52 PM
From: russwinter	Read Replies (3) of 4051

Anybody with certain gold stocks needs to take special heed. The next six months (the final solution) is going to take a number of high cost producers dependant on hedging out of business, or at best leave investors with 75% mark downs from this level. HOLDING THESE NAMES COULD BE DANGEROUS TO YOUR FINANCIAL HEALTH. Case in point is Harmony, a name I've never owned, but sort of admired as a non-hedger. No longer, as this purchase of Elanstrand and Deelkraal (recycled garbage) from AU and the use of hedging (puts) to try and bet on the come will blow up in their face. Another bad business model and an attempt to keep uneconomical production going far longer than justified in the current environment. Very disappointing to see this company doing this, and the market has quickly sent its message by rerating the shares lower. Look for more. Reports that Aussie and SA producers were selling more contracts here is insane. Avoid like the plague. The huge winners from this final solution stage may be few and far between. Most of the non hedged logical larger candidates (Goldfields, Newmont, FCX, and Goldcorp, actually are no big caps in the industry, mid-cap is more accurate) look a little pricey yet given the reduced ($260 POG)cash flows. ABX's and others only hope is to cover their shitload of derivatives. At these prices, it is amazing they aren't. I still keep coming back to advanced stage exploration outfits where the equity markets are non-existent and destroyed. That's where you'll find the made up prices that bear no resemblance to enterprise values. And one can add a handful of smaller producers mentioned in my prior post. With the lights going out on the current producers, some new outfits will come on the scene and reassemble the broken artifacts. Low cost deposits will be prime. Message 15216019

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