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Gold/Mining/Energy : Gold Price Monitor

GDXJ 109.23

+3.7%

Nov 28 4:00 PM EST

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To: Don Lloyd who wrote (88329)	7/25/2002 11:23:50 PM
From: goldsheet	Read Replies (1) of 116779

> Exactly what do 'reserves' mean physically and financially to a gold miner? Reserves are resources that are economic at current gold prices. When gold prices were falling, many firms wrote down their reserves. Likewise, as gold prices rise reserves get wriiten up. > What is the implication about which you were warning? There were many concerned the gold industry was going to run out of reserves as result of the lack of money spent on exploration over the last few years. One saw a lot of lame simplistic calculations that with something like 640moz in reserves coming out of the ground at 80 million ounces per year we would run out of gold in 8 years or that gold production would plummet 30% by the end of the decade. Lots of firms found gold earlier in the decade as a result of expenditures in the 93-95 timeframe. These finds did not disappear, but ended up in the resource category. My warning was they were going to come back into the reserve category as a result of higher gold prices without any new expenditures. In addition, many mining firms have done an excellent job of replacing production even at low gold prices. I started a analysis earlier this year that accounts for about 38 million ounces of production, where the firms saw there reserves go from 529moz to 527moz, depleting 2moz of reserves. This meant they did a successful in-house job of finding 37moz of reserves in current or developing projects, a 95% replacement rate. There's lots of gold available at just slightly higher prices (in the $325-350 range) and when they come into production will most likely limted future price movement upward. Don't get me wrong. it's nice we moved from $250-to-$310, up $60, but the next $60 is going to be a lot more effort. I still think somewhere around $325 is "fair market value"

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