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Gold/Mining/Energy : Royal Oak-RYO
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To: Michael Bidder who wrote (1093)7/23/1998 1:48:00 AM
From: Elizabeth Andrews  Read Replies (1) of 1706
 
Perfect! This is the stuff that makes bottoms. This forecast is probably dead wrong. The type of stocks to own when gold turns are just like RYO. In fact, it is textbook. Highly leveraged balance sheet. Marginal gold properties. Waste becomes ore. Revenue explodes and costs stay the same. The cash to the bottom line goes through the roof as the double leverage kicks in as (if) (when) gold moves. The mineable reserves get redefined and receive a higher cap value. It's happened many times before.

I belief that we are at a point of maximum bearishness in the resource markets. It's only a matter of months before the cycle may change. RYO under its current arrangement can last for another two years but don't treat it like a warrant. It may be unwise to be a believer without questioning what drives things. If you are betting on much lower gold prices to knock out RYO you may loose more on your house if that happens. The USA is not going to let the world slip into a depression. They are saviors remember.

Michael, I think RYO is a poorly run business with very low quality assets. It's not a defensive stock. But if gold turns, RYO stock will outperform Barrick during the upswing. You are in the majority at this point and that usually means you are at the lowest part of the food chain. We've just gone through the opposite part of this cycle with Bre-X. Almost everybody got eaten because everybody believed the same thing. It was safe. But, cycles are cycles and leverage is leverage and believers are believers.
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