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Gold/Mining/Energy : South African Gold Companies
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To: Wade who wrote (10)10/9/1997 9:33:00 PM
From: Christopher White   of 17
 
Wade,

Thanks for that outstanding link. I agree with your assessment that South African gold producers are trading at a tremendous discount. Even considering the accounting differences, North American gold producers trade at an earning multiple 3x-4x that of their South African counterparts - ABX vs. WDEPY for example...I suppose this is because of a perception in the market that South Africa is not politically stable.

I do not understand why richly valued North American producers don't just buy up South African mines - it would seem to me to be a cheaper way to get reserves than all the exploration they do. To me the problem that South African mines have with rapidly escalating labor costs indicate that they are not using the latest mining technology...North American gold producers have high P/Es, so for them equity capital is cheap - buying a South African mine would be immediately accretive to earnings and would provide the an inexpensive way to get the capital necessary for mine improvements which would improve productivity.

Christopher
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