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Strategies & Market Trends : Natural Resource Stocks
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To: The Vet who wrote (17910)11/23/2004 5:50:12 AM
From: jimsioi  Read Replies (2) of 108549
 
Higher gold prices flow through to the bottom line?

That would seem to be the expectation, but I don't think we've seen that in the last two years anywhere near to the extent one would expect. South Africans being miserable failures due to the Rand. Something always seems to get in the way...I think for every one instance one can find of such flow through of higher metal prices to earnings / cashflow there are at least three where it hasn't happened.

Given the time over the holiday I'll take the time to expand on this point...in theory it should happen, but it hasn't ... GSS is a perfect case in point...What have GLG's earning done, very little...MDG, NEM's? Now NTO's have increased with the success of the Alumbra (?) mine they and WHT have interests in...Have PAAS's earning increased with the price of silver, perhaps on a percentage basis but the absolute dollar gains seem to have been lost somewhere.

A single mine operation like GRZ's of large scale with relatively low costs would seemingly have the best chance of experiencing increased profits with rising metal prices in the rough lock step you suggest. However there are royalties and taxes, and as mentioned other things that get in the way, like bonuses, and additional exploration expenses that make the relationship far from one to one...
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