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Gold/Mining/Energy : Francisco Gold - FGX.V -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (792)	5/8/2000 6:46:00 PM
From: Nexus	Read Replies (2) \| Respond to of 1907

<<I am sure we agree that the fair value of a company is what you would get if you liquidate all assets and distribute the cash to shareholders.>> Agreed, but fair market value is what you can get it at in the marketplace. <<If a company claims they have a property that has probably 7-10 millions ounces of gold, this creates high expectations and a large premium.>> If it is all hearsay, it might command a high premium that is not justified and that premium will eventually be eliminated. If it is a reasonnable target according to all information available, most of the price might be justified. There still exists a premium that includes the possibility of the target being hit and surpassed and also the possibility of a failure. If exploration results are better (or worse) than expected, the price will adjust itself higher (or lower) accordingly. <<If another company has a deposit worth $10-$12 a share, but says they are not selling it below $15, this creates doubts in the market, low expectations that a deal can be done and follows a total absence of interest for the stock.>> Ok Claude, this is finance 101 stuff, so listen up. If a deposit is worth $10-$12 per share, why on earth would someone pay $15 per share for it. Do you pay 25% more for your groceries than the price listed on the items? Yes that does create doubt as to the possibility of a deal being done and it does cast a doubt in the investment community and might be another reason for the absence of interest in the stock. <<I am sure that you have seen in your life as an investor, some stock with a lot of cash in the bank amd no debts, selling at a 40 or 50% discount to their cash value. Where these stocks undervalued ? Sure! And that was because expectations were extremely low that management would do something with the cash. In most case the market was simply wrong and impatient. If the company did nothing for the last 5 years with cash invested at 5% and you as an investor invested is the market at 20% (not unrealistic in the last 5 years), the price of the stock of the company would be justified at a 50% discount. The market was right to be impatient. If you invested at the cash value, which 'seems' like a good deal, you would lose half you money plus the lost opportunity. <<I am sure you don't think that someone would pay C$100 millions for Luchio at this stage of the game.>> They would have to pay more and the more they wait, the more they'll have to pay. Nexus.