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

To: goldsheet who wrote (1173)	5/30/2001 10:11:11 AM
From: russwinter	Read Replies (3) \| Respond to of 4051

On the state of the industry, last night's Istanbul talk from FN's Pierre Lassonde: thebulliondesk.com Slides: thebulliondesk.com Main points: When hedge gains are removed not a single company apart from FN comes close to covering cost of capital. He felt the top 3 companies in gold mining are financial firms not mining (I think you've heard me say that more than once). 20% or US 4.3 billion of industry book value has been written off. If reserves were calculated at 265 there would be much more. (Heard me say that more than once). Taking NAV of the nine largest gold companies using 275 POG and a 5% discounted cash flow the public is willing to pay on average DOUBLE what these stocks are worth (see slide 6 for the company specific numbers). Premium takeovers are not likely. (Once more, great minds think alike). One would think instead that seniors would use their overpriced currency to purchase select juniors or mid-caps that do have reasonable valuations. However, few companies have the working capital to develop new projects. All the major gold co. will be closing down mines in the next five years. Ore reserves are diminishing and environmental liabilities (another reason why high cost, short lived, shut in mines are unlikely to reopen at higher POG)are being moved forward. New deposits: Not economic if the total costs exceed 225. Those costs are operating costs, capex, sustaining cost, G&A, and exploration. On the later the average industry cost is $20, with hit or miss results. Using 20 for deposit cost, a project would have to have cash costs below 135 to pencil. There are only a handful a decade meeting that criteria. And oh BTW, with exploration budgets slashed 70%, that handful expectation looks a bit high.