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Gold/Mining/Energy : Golden Eagle Int. (MYNG) -- Ignore unavailable to you. Want to Upgrade?

To: ge-believer who wrote (30588)	2/23/2003 3:53:33 PM
From: Claude Cormier	Read Replies (4) \| Respond to of 34075

<then you must have some facts to support your claim that "it will never be able to prove reserves". What are they? > I do not read in any of MYNG published documentation that it intends to proceed with a program that will end up with enough samples to statistically prove that there are a specific (large) number of ounces in a specific area of the property. Furthermore I do not see that they have spend the money or that they have money to spend in the future on such programs. <Feel free to start by explaining how we have failed already to meet the SEC's requirements for proven reserves at Cangalli. > Not enough samples. <You could then explain just what it is about the deposit that makes it impossible to ever prove reserves.> I didn't say it was impossible. I said that "Myng will never be able (may be I should have said willing) to prove up reserves". Here is the reasoning. MYNG has decide to go the route of step-by-step production. They are spending on establishing small scale production plant and have stated in their business plan that they will grow from production cash flows, increasing first the throughput of the plant until it reaches optimized throughput and then adding more plants. If this work why would they need to prove reserves. MYNG will continue to produce gold and generate cash flows and their stock will continue to be valued on hopefully growing cash flows. This will work even if it will not help obtain the highest valuation possible like the GoldCorp of this world are reaching. They could decide to prove reserves because there are methods (although expensive if not very expensive) to do it including processing thousands of mini-bulk samples all over the property. But that is not what they say in their business plan. If they ever do, then we I will change my valuation method. But if their business plan doesn't work, then it will be too late, nobody will be available to finance a multi-million exploration program like other companies do. If a company has no or few proven reserves, but still generate cash flows from production, analysts and bankers can only evaluate the value of the company on this factor alone: the level of the cash flows. Initially the cash flow to stock price ratio is very low around 5.0 as the proof that sustained long term production can be achieved are not yet on the table. But over time, after years of production, the cash flow to stock price will probably expand somewhat, but this take times. I can see MYNG selling at a 5-8 times cash flow in the years ahead, but I doubt that one day an analyst will come and say something like: "Based on their YYY millions ounces of ecomomic proven reserves at gold $XYZ, MYNG shoud be worth XXX dollars". For the record, all the companies I follow except Myng are raising money to prove up reserves. That is why all of them (except Myng) can be evaluated on both the potential of future cash flows and the potential of future reserves. For the record also, I am probably one of the rare "newsletter guy" who follows MYNG steadily. Believe me, if I didn't think that there would be some chances that this story unfold in a positive manner, I would not be here.