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Gold/Mining/Energy : VISTA GOLD Corp.

VGZ 1.670

-1.2%

Oct 31 9:30 AM EDT

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To: Bob Mohebbi who started this subject	1/25/2004 9:11:02 PM
From: Bob Mohebbi	Read Replies (1) of 4

Sunday, January 25, 2004, 1:55:00 PM EST Gold Stock Valuations Author: Jim Sinclair The most egregious market fabrication of 2003 is that gold stocks are valued by their earnings stream not their assets A gold stock should be valued as a miner of a currency when gold appreciates. The safety character applied to the shortest term Treasury bill should accrue to the well-run, rich, gold producer with no hedges and significant proven reserves and existing production. This is rational when you recognize that gold rises only when it assumes its inherent currency form. Gold declines in worth as it moves into a commodity form. That is the entire story of how gold is valued in the marketplace. All else is noise and a waste of mental energy If you doubt that gold is money, hold 20 or 30 one ounce gold coins in your hand and ask yourself if this is money or a commodity! Anyone willing to be truthful, will tell you it gives you the warm, safe feeling of a currency that knows no ruler of any kind. No matter how the coin is struck, it gains its value from its fineness and weight and nothing else. In an attempt to hold the gold producers in market price contempt, the street analysts are applying valuation methods to gold shares that are more common to manufacturing concerns. PE ratios as a major driver of the proper market price for gold shares receives the “Fickle Finger of Fate” award for the “Most Egregious Fabrication of 2003.” To see this foolishness published by South African analysts is the height of idiocy for our new generation of stock valuation analysts. Commodity situations properly valued are products of the value of their assets per share and the reliability of their earnings trend. Reinvestment of earnings into the ground in the same fiscal year assures the continued life of the entity. So those expenses are in fact a means to an asset and should be recognized rather than considered expensed items - like salaries paid to run a manufacturing machine. That runs afoul of US GAAP regulations. It is this insidious method of thinking that leads to the devaluation of gold shares and retains the status quo in the current equity markets. Kudlow and Cramer are masters at this art. I enjoyed watching a gold equity expert on their show put this concept into one magnificent sentence just before K&C ran him right off the screen using a “short of time” excuse. Then they went into a discussion between themselves on nothing particularly important until the next advertising break occurred.

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