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Gold/Mining/Energy : Exall Resources/Glimmer Resources
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To: James N. Wilson who wrote (770)1/6/1999 2:05:00 AM
From: E. Charters  Read Replies (2) of 1319
 
It is all good logic and I agree with you on the depleted share price of the two stocks but that is the way things go in a depressed junior market. These markets are driven by unrealistic expectations and are rarely earnings driven. Most want out far before the stock ever gets to being an earner as the price peaks sometime before feasibility with a few exceptions.

BUT this kind of market is kind to longer term speculators who are banking on a return in the price of gold to provide a fairer valuation to companies that will trade at around 1 times earnings when the market is being glum. Right now GME trades at 2.74 times revenue (which is pretty well equal to earnings.) This is fair but with better gold prices and better grades due to improved mining methods and a larger percentage of the take this would change.

I calculate that the earnings could increase by 25% with better mining methods, not too hard to achieve. After they win a bigger share of the pie their earnings could increase by 60% again. This is a double. If they expand operations then they could increase cash flow by two times again.

While debt would increase the money flow could increase quite conservatively by 4 times by the above. If the evaluation was 5.5 times earnings the price would double again. This is a factor of 8 in the possible price increase that is totally conceivable and fair given their situation and calculated reserves.

mailto:echarter@vianet.on.ca

The Canadian Mining Newsletter
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