Gold and Silver Juniors, Mid-tiers and Producers Message Board

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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: tyc:> who wrote (35457)	3/9/2007 2:31:40 PM
From: E. Charters	Read Replies (1) of 78428

The why of the back-in has to do with how many properties they have, and what it will cost to buy back in versus explore it themselves. It has to do with the chances of finding more versus the money they have right now. So they make a deal that on the off chance it does firm up, they have a right to back in. Generally that right is low ball. Really low ball. Has to be. It has to compete handily against the cost of exploring it themselves. So in essence all back-ins are cheap exploration for the company. Pay later when it is worth it and they can raise the money for it more easily. Don't forget that even Teck has to finance mining projects. They don't just dip into their cash accounts to start 500 million dollar mines. They borrow, issue stock, write bonds.. Why 4 times the money.. as hank2010 points out.. well they have to make it attractive to the junior or it does not get explored... so they pay a seeming premium.. but it is captive. is paying 4 times the explo for a 100% chance that bad? What is the chance of paying one and finding? 1 in 4? or less? .... These payout schemes are ratioed by careful math, believe it. They have statisticians whose formulae that have carefully calced the economics of it.. remember they subtract the carrying cost of the property too... you have to work on them every year in most juridictions... have to keep people on them too.. EC<:-}

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