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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ken Benes who wrote (52379)	5/5/2000 7:04:00 PM
From: russet	Read Replies (1) \| Respond to of 116814

<<If you do not bring a new mine to production, you increase reserves, delaying a reduction of those reserves until you begin producing. In the interim of time those proven in ground reserves have a value that accrues to share price. Some would argue that in ground reserves give a gold producer a higher valuation that earnings per share that is predicated on depleting a reserve base.>> Few countries allow a mining company, like for instance Anglo (which has sat on reserves in the past), to continue to do this. The governments are saying develop it or lose it. Governments want companies to provide jobs for their people, and taxes for their troughs. The rules are changing. Most analysts I know determine stock price targets for companies by calculating future eps and using an industry multiplier, which includes factors for various risks to determine what the shareprice should be based on their assumptions. Recently multiples for gold mining companies have come down to decade lows reflecting the awareness of several risks they are facing, such as the risk the POG will continue its down trend, country and political risk and environmental risk. Recently we have discovered a new risk, the threat that increases in the POG could bankrupt some producers who hedged poorly. Many analysts expect multiples for pure gold miners to continue to drop, particularly because of the strict environmental laws and permitting requirements that are being legislated in many countries now. They may continue to make more money by lowering costs and increasing revenues, but the increased risks they face could undermine these advances by lowering the industry multiple, hence lowering all these mining companies share price.