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

To: TheBusDriver who wrote (2255)	3/8/2002 8:26:49 AM
From: geoffb_si	Read Replies (1) \| Respond to of 39344

Wayne: I lean in your camp, that the reserve replacement models (O&G and Gold) are very similar, and we will continue to see consolidation in the golds similar to the oils in the 80s. Gold majors wil replace reserves and/or grow the "cheap" way, through acquisition. However, Liz is right that the O&G model is different in many ways. For instance, the up-front money required to assess and drill a prospect, which explains why many projects are JV'd to death. A 3d seismic can cost $200k-$1M. ONE oil well drilled to a typical depth of 8000 ft can cost US$1.5M. And none of that takes into account how much it costs to tie in that production. Compare that to a gold junior that can drill several holes for C$200k. Large upfront costs explain why an O&G junior usually end up with a minor interest (less than 10%) of an oil field that gets tied in. Regards, Geoff