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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: TheBusDriver who wrote (2213)	3/7/2002 9:35:33 PM
From: Elizabeth Andrews	Read Replies (1) \| Respond to of 39344

I don't buy the analogy between the oil patch and gold properties. A lot of the merger activity in the oil patch is driven by companies who can combine interests in the same property owned by a competitor. There are many fractional interests in oil deals unlike gold deals. The primary goal is to become the operator as there are financial rewards for that. It's a totally different business model as well due to the fact that the resource calculation and production profile of reservoirs is fraught with risks, thus the low cash flow multiples in the patch. The capex requirements of oil companies are also a problem as the company has to keep drilling to maintain its production base or cash flow collapses. The mergers are driven by this as well as it's always cheaper to buy oil reserves as finding costs are relatively uniform in the industry. Not so with gold producers as the finding and replacement costs vary greatly between companies.