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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (2261)	3/31/2002 5:14:49 PM
From: posthumousone	Read Replies (1) \| Respond to of 3558

On the bulliondesk.com right now they have POG Bid 303.55 ASK 304.50 GMT 02:33 but Kitco has Bid 302.20 ASK 303.20 ET 08:33 Anyone know which is accurate and why the difference?

To: Tommaso who wrote (2261)	3/31/2002 6:08:14 PM
From: nickel61	Respond to of 3558

You have the gist of it. Shareholders buy the stocks of mining companies for the period of time when Gold or Silver prices are rising. It is the leverage of an increasing value that is attractive. These gold mines are also massive cash flow generators. They tend to be financed with debt in the front end and the management generates a lot of cash as the open pitable realatively low cost gold is mined and sold. The debt is then retired and hopefully they are able to move the into the rest of the deposit. If gold goes from $300/ounce to $400/ounce and I have a million dollars in gold or 3,333 ounces up $100/ounce I make $333,333 dollars in appreciation. In a gold mining company if the stock of Newmont is earning $10/ ounce at $300 gold it will earn $110/ounce at $400/ounce gold and the rise in the markets perception of the value of the Newmont company would go up roughly about three times as much as the increase in the underlying increase in the value of gold itself. Of course were this to happen some speculators would immediately start thinking about the possiblitity that the price of gold might go to $500/ounce and then the value of Newmont's production would go up even more dramatically. Helping this leverage is the fact that all gold mines have many resources that are not economic at $300/ounce gold and there fore are not shown as reserves and are not in the mining plan to be produced, as the price of gold rises many more of these ounces become economic and they are taken into reserves and eventually into production. This of course dramatically leverages up the upside potential for the earnings as well. All of this means that the potential to have this type of wealth creation is what really attracts investors to solid gold mining properties. If gold were to go to $400/ounce I would venture a guess that Newmont would benefit to the $50-$55 range at least and if it went to $500 most likly the factors we talked about above would make it likly that it might see $100/share. THat is obviously an attractive return and significantly higher than you would see in the underlying gold bullion investment. I hope that is helpfull. The fact is that is this option type pricing that is always priced into the value of gold mining stocks. Even when the whole price structure is depressed. What makes these gold mining stocks attractive now is that both Barrick and Newmont have swallowed whole competitors who have many mines that are not currently economic but well might be brought back into production at $400 or $500 /ounce gold prices.