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

To: goldsheet who wrote (53445)	5/31/2000 1:30:00 PM
From: long-gone	Read Replies (1) \| Respond to of 116950

<<Manufacturers of widgets will slow the assembly line if the market is flooded with product and the price commanded for a widget drops. >> Not really, they run a a slightly lower speed for a short while, then when thye see nothing can be done, they ramp up run WFO then lay off. Then again, one must consider most every widget is made by a contract house these days. Production Planner - thank you.

To: goldsheet who wrote (53445)	5/31/2000 4:18:00 PM
From: Ken Benes	Read Replies (3) \| Respond to of 116950

Unfortunately, gold is not an average business that can thrive on reducing costs and increasing margins in a competitive environment. The allure for gold stocks remains that big payoff if in fact the sky does fall one of these days. Hedging has eliminated that big payday by confining the metal to a precise trading range that has rendered gold a commodity fluctuating in price between supply and demand. For an investor interested in margins, internal rates of return, debt ratios, and all the other fundamental principles used to evaluate a stock, he will look elsewhere for opportunities. Stripped of a safe haven status, gold companies have little attraction for investor dollars. Their appeal has diminished as the attractiveness of their financials may or may not have increased. The managers of today's gold mining companies have failed because they were unable to recognize the true nature of their business and its attractiveness to investors. Just think of those margins, if the producers scaled back production, while they reduced costs and the price of the metal appreciated because of limited supply. Cash flows, margins, and eps would all increase as a ten percent fall in production would be offset by a corresponding increase in prices. I believe that is what happened in the oil market. The producers cutback production by 10% and prices thripled in less than a year. What happened to their margins and rates of return. They grew exponentially while producing less and conserving their reserve base for a longer life cycle for existing supplies. Regardless of how you judge the gold producers they have been sold a bill of goods by a group of bankers who convinced them that all the arguments you listed would benefit them. The reality, they crippled an industry and continue to do so because they believe the bankers more than they trust the market. Consequently, investors have voted with their money and the producers have become the laughing stock of the equities markets as the professionals watch gold equities flounder in the cesspool of their own making. Ken