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Gold/Mining/Energy : Gold Reserves Limited GLR - TSE
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To: Orwell who wrote (215)12/18/1997 12:52:00 AM
From: The Vet  Read Replies (1) of 406
 
On ABER my opinion is that anything under $20 CAD is a gift. ABER has a unique position in the diamond market in that it has the rights to sell 40% of the production of what have been shown to be the most valuable kimberlite pipes in the world. At valuations of over $250 per ton these pipes are twice as valuable as most of the South African mines and they have a high proportion of valuable macro diamonds, the area of the market that is still appreciating in price.

I have seen quite reasonable calculations that show that the profits from the first years mining will recoup the entire capital cost of the mine and after that profits of $5 to $7 US per share could be achieved. Real results tend to be less than initial estimates but what value would you put on a stock that returned a dividend of $5 US a year? This should be confirmed by the end of 1998 but of course there will be people in the know before the information becomes public.

Much of ABER's price drop was caused by the drop in the POG and redemptions of precious metal funds who liquidated everything regardless of the fundamentals. The market is suffering from a popular perception fostered by the press that you should only buy "blue chips" regardless of price or earnings. This will change when the buyers realise that the price of the "market leaders" is way out of proportion to their real earning capacity. Having said that it always takes much longer for the market to acknowledge their mistakes than most of us realise.

I believe that Gold Reserve is also suffering from a combination of poor sentiment, overselling and manipulation before the funds start to buy back as cheaply as possible. They have already loaded up on ABER and GLR will follow. Once they are ready you will see the reports pushing "the great potential" of the smaller stocks and when gold moves substantially higher then the rush from the lemmings anxious to buy will create the profits for the holders who talked the stock down in the first place.
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