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Gold/Mining/Energy : Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG -- Ignore unavailable to you. Want to Upgrade?

To: Exsrch who wrote (415)	6/24/1999 2:53:00 PM
From: Exsrch	Read Replies (1) \| Respond to of 48092

Everyone, I believe investors long on ABX won't benefit fully till the market realizes several things: - ABX in no longer a gold producer (I bet that got your attention!) - ABX Free Cash Flow (FCF) and Return on Invested Capital (ROIC) is not affected by volatility of AU price below $385 for the next three years. Plus, AU price above $385 will create negligible transaction cost with little impact on earnings. As a side note, ABX could do a better job optimizing their ROIC by adjusting for debt and equity but not realistic when people invest only for AU price upside (more on this later) - ABX builds enough of a war chest with favorable asset prices (for other gold producers) that it sheds its ultraconservative balance sheet and starts kicking some ass and consolidating the industry (and taking capacity offline) - Gold bugs stop investing in ABX for exposure to upside in AU prices (though I wouldn't discourage it thats not why you should invest in ABX). - ABX in no longer a gold producer (I bet that got your attention!) What does ABX really do well? Yes, they produce gold at a low cost. Yes, they manage exploration great. Yes, they do all things that make for a great gold producer. But so does NEM, PDG and other blue chip gold producers. Why the balance sheet, income statement and cash flow differences? Why the different FCF or ROIC? ABX has effectively disconnected their performance from the AU price through hedging. I would characterize ABX in the following way, a growth company in all respects: - Consistent topline growth (others are lowering production to optimize revenue) - Consistent earnings growth - Consistent increases of cash flow (30% increase for FY 99, with a strong net to FCF) - Consistent increases in ROIC (reflect better cantango performance from off balance sheet assets that impact on balance sheet ROIC numbers) - Consistent VALUE, VALUE, VALUE Would Buffet invest in this type of company? Why not, it meets all his stated objectives as an investor. ABX is a great growth company with tremendous value creating capabilities. If this message is understood by the market it won't be only the gold funds and bugs investing. It will be all other funds and investors looking for value who want the added protection against inflation and market downturn (and yes upside in AU). Look for a beta less than peers when market realizes ABX for what it is - ABX Free Cash Flow (FCF) and Return on Invested Capital (ROIC) is not affected by volatility of AU price below $385 for the next three years. Plus, AU price above $385 will create negligible transaction cost with little impact on earnings. As a side note, ABX could do a better job optimizing their ROIC by adjusting for debt and equity but not realistic when people invest only for AU price upside (more on this later) What more can I say about this one. We know it but the most investor don't care because they focus on AU prices. The only way to change this is to get none gold investors to look at fundamental growth and value issues for ABX. - ABX builds enough of a war chest with favorable asset prices (for other gold producers) that it sheds its ultraconservative balance sheet and starts kicking some ass and consolidating the industry (and taking capacity offline) Let Field Marshall Munk unleash his forces!!!!! As an outsider it seems a little too conservative. But I trust they (Munk and his generals) aren't that dumb. I am anticipating some action soon especially if the AU price stays low. - Gold bugs stop investing in ABX for exposure to upside in AU prices (though I wouldn't discourage it thats not why you should invest in ABX). I should rephrase the above statement. We want Gold bugs to invest in ABX; however, we want everyone else to invest in ABX for the growth part. Not only for the upside in AU prices. By investing in ABX you get growth and value but simultaneously you get inflation and market downturn insurance. It is only a matter of time (I wish ABX would be more serious about getting the message out to the non gold investment crowd). Your thoughts are sought after. Both pro, but more importantly, the con. If I am wrong I don't want all the wrong people to agree with me. What a circle of doom that would be. Write and contribute! Cheers, Exsrch