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

To: Wade who wrote (425)	6/27/1999 9:31:00 AM
From: Exsrch	Read Replies (1) \| Respond to of 48092

Wade, I think we are in the same boat. Our views are similar. Although I would not risk investing in juniors I see your point in diversifying and locking for the big return if POG does recover. You wrote: <<..The only reason they can have people to buy gold at much higher prices is those people believe that POG could rise in the future..> I think on this point you misunderstand what ABX is doing in the marketplace. ABX does not sell gold at a preminum nor is anyone stupid enough to pay at higer prices with all the uncertainty. They like everyone else buy gold at spot. They make a premium in the following way: They are like everyone else and they can get no more than what the market will bear. They sell above spot via two methods. 1. Accounting 2. Cantango The explanation: 1. ABX borrows gold (enters contract) from CB via Gold Banks (GB). 2. ABX sells gold at spot price in the market. 3. ABX takes proceeds from the sale of gold at spot and invests the money in Money Markets (hope nothing with a higher beta). They currently manage $4 billion in off balance sheet assets. 4. The accumulated interest they earn (so far about 7.5% on average)is added (via accounting) to the original sale of the gold and viola you have average ounces sold at above spot. This accumulated interest is the "cantango". I believe this is recorded on their book when physical gold is returned to CB. You can confirm this at www.barrick.com under Premium Gold Sales program. Essentially ABX will consistently borrow gold and sell forward. Invest this asset ($4 Billion currently earning $200 million per year) and earn interest. As long as gold does not drop below their veriable cost and obviously their fixed cost the party continues. I would argue that they continue to benefit as price of gold drops. They still will make a premium while their peer companies become more likely candidates for take over. Have a look at the ABX homepage and let me know if you become more secure in your investment of ABX. And I don't care much for what CBs will be doing in 20 years. Gold is too volitile. I am investing in ABX because we are at the bottom. When the market tanks I'll move back into select dow components (hopefully with single digit multiples) and wait for them to recover. Cheers, Exsrch Cheers, Exsrch