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Gold/Mining/Energy : Gold and Silver Mining Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Richard Mazzarella who wrote (591)	2/11/2001 9:10:07 AM
From: russwinter	Read Replies (1) \| Respond to of 4051

I will admit to being a purist. I want these outfits to get back to the basics, let's call it KISS: keep it simple stupid. I find it absurd that miners can't produce without the need to put all this goo into the mix. I'm an apartment redeveloper and have a general idea what the rents will be. If my bank asked me to use puts or hedge (lock in) some relatively low level of rents I would think they were nuts. In effect, I'm saying if the margin is so slim that the project needs this strategy to pencil in, then it shouldn't be done. Real estate, like mining or any resource is a depletion business. But, it shouldn't be about just returning capital and perhaps some puny little profit under a fixed price scheme. The proper model should look at replacing the used up product at prices that gives me a good return on two components: first is my capital investment (finding and development costs), and second is the operating side of the product I sell (housing or gold). Most of this industry is focused only on the later. Even more important, is the ability to GREATLY PROFIT (The Call) from bull markets or good times. That is especially true today in gold, as I am convinced it is selling well below it's equilibrium price. So the miner should be doing a continual calculus that asks, "if I sell an ounce of gold today at $260 (not some hoped for price), can I find, develop and produce a new ounce, and make a high rate of return (I'd say at least a 15%-20% to cushion against downside and account for the inherent risk of mining) AND still have open ended upside potential on that new ounce. If I can't do ALL that, I should be thinking in terms of mothballing my project until conditions improve. If I can do some of that, but give up my upside (spread businesses like ABX and others) then I deserve a slow growth insurance company or bank valuation, and certainly not 7-8 cash flow. And if I'm too weak financially to mothball, I should be combining with a larger outfit that can weather the storm. If nobody wants to combine, well it is time find a new line of work, and turn over the keys to the banks and hedge counterparties (an event I pray for every day). The few remaining gold stock investors should be looking at the same thing with our capital. We need to be purists, because that's the correct model towards our making huge profits when the worm turns. Does a company like Harmony fit this? I don't think so. In fact, I find very few that do.