Graham,
Yes, enough said about drumbeat, but I have some fundamental concerns about the subject.
In my opinion, drumbeat was not trying to manipulate people by promoting Bre-X as an investment, as much as anyone may be trying to short/bash Bre-X. The majors use the bashing strategy quite successfully to buy a promising play at bargain prices. Look at PFG (BTW, I am a shareholder of PFG and have been for for over 2 years). Barrick basically stole 70% of Diablillos from PFG. Barrick tried this with Bre-X several times but has been unsuccessful. Thanks to David Walsh. He outsmarted Peter Munk each time.
As for threading, there are no rules that I have seen on SI such as:
1. Thou shalt not uses alias
2. Thou shalt not operate under assume names
3. Thou shalt not be an ardent supporter of a stock, etc. etc.
As a minimum, a warning should be given.
To me, MOST IMPORTANT reasons for silencing a threader should be if he/she is promoting child pornography, physical and mental abuse, obscenity, and hate propaganda.
About Bre-X:
While I do not know what tomorrow will bring, I beg to differ with you in the valuation of Bre-X. In my opinion, even at $30/sh Cdn, Bre-X would still be undervalued. Here are my reasons:
1. It is wrong to compare Bre-X to any other development company that is turning into a producer. Most companies, as they are entering the production phase, have largely delineated their reserves. Future additions to reserves at this stage are minimal. But Busang continues to add reserves at an average rate of 10M ozs Au every month for the next year and at practicaly no cost. I have heard from a reliable source that to date Barrick has spent close to $100M in Indonesia looking for gold, but have yet to show any promising results.
2. Even if you regard Bre-X as a producer, with eps of $2.50/sh in 5 yrs (First Marathon report), discount this over 5 yrs at a 5% rate, then apply a Price to cash flow multiple of 30 (Barrick is 33), The current value of Bre-X stock price should be about $75/sh Cdn. Am I trying to manipulate the stock? I dont think so. I am merely staing a mathematical calculation. (I might get turfed by the Internet police for this).
3. In my opinion, Bre-X can easily grow from here. I am sure many grass root companies would like to be associated with Bre-X. Instant recognition, ready access to capital and expertise.
4. Selling in Bre-X is largely over. Ofcourse, the former speculative appeal is gone, but the fundamentals are compelling.
5. IMO, Bre-X is still a takeover target. The reserves for the majors are declining. The only way they can substantially increase their reserves are by buying each other out, and for billions of dollars.
6. I think the grades from fenceline 71-74 will improve. For a moment think of hole BSSE-198 on fenceline 66.5, the results were a 1300 feet of intercept at an average grade of 0.37 oz per ton Au. Wow! I have never in my life seen such good results. After the next drill results/reserve calculations, and the deep drill results, I am sure the majors will get hungry again.
7. The longer the majors leave Bre-X alone, the stronger Bre-X will get. In a few years, Bre-X will be able to buy out Placer/Barrick.
8. In the event that gold crashes to below $150. I dont think this will happen, but just for discussion. Which company would you be investing? I'd rather be in Bre-X than any other producer except Freeport. At $150/oz Au, Bre-X will still be making tons of profit. But as for Barrick! You know what happened to Clairtone Sound!
Ofcourse, I might get silenced on this thread because I am a strong Bre-X supporter, and some may accuse me of manipulating people. But I firmly believe this stock is currently extremely undervalued.
I can still hear the COWs. They should be home soon.
Regards, Lalit Jain |
