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Gold/Mining/Energy : Precious and Base Metal Investing
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To: bill who wrote (3307)4/26/2002 10:23:56 AM
From: Elizabeth Andrews  Read Replies (2) of 39344
 
I don't think $305 gold has any significance except that psychologically it's way better than $290. For significant new exploration and greenfield investment I believe $340 gold is the important number. A lot of the feasibility studies floating around on low grade properties are basically very skinny and don't have any margin for error at $300 gold.

Most mines encounter startup problems some serious but all usually require more capital than estimated. For small companies that can create real dilution as the projected project rate of return falls to zero or negative. The marginal effect of a 10% move in gold from this level is very high for most low grade properties. It is very important for the economics of most of the stocks discussed on this thread that have a drilled off resource.

And, all drill holes are not equal. And, estimating the grade and mineable tonnage of a deposit is only as good as the number and type of drilling done. Many deposits don't have enough drill holes in them to remove 99% of the grade risk as junior companies usually do not have the cash to drill enough holes. And, feasibility studies are not all to the same standard.

You can't rely on anything until the bank writes the check for the mine and then you still have to worry because blasting and moving rock creates a bunch of new problems that can't be accurately tested for in the lab, especially if heap leaching is the technology.

I don't believe anyone really knows what gold is going to do in the next six months but it feels like it's going higher to me.
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