The Original In Gold We Trust

Acting Man blog pointed out the source of the original title of 'In Gold We Trust' is found in the report from Ronald Stoeferle @ Erstebank. In his report, he states that the performance of gold in various currencies is not necessarily due to a shortage of the metal. Acting Man points out that the increase of production in Copper has not necessarily led to a deflated price in the metal. But the one factor that might be really important is how gold performed in $CDN during the bull market.

source: http://www.acting-man.com/blog/media/2011/07/ErsteGoldReport2011.pdf

In terms of the Canadian dollar, you have a median appreciation in the gold price of 11.50%. So if your discount rate is chosen as 7% due to the recovery rate hypothetically sitting @93%, then your overall discount rate will be -4.5%.

Previously I had stated that the discount rate could be as much as -10% (7 MINUS 17) for U.S. dollar terms, but if you want a real appreciation of $CDN terms, you would use this revised amount. So the denominator in our NPV calculation is not .9, but .955 to account realistically for rises in the $CDN in terms of the $CDN dollar gold price, and to arrive at a realistic look forward on terms in Canadian dollars of what the share price might represent.

Ronald Stoeferle may know a thing or two about pricing in the gold, but the 'In Gold We Trust' report is an exceptional summation of the gold mining sector and is a must read.

http://www.acting-man.com/blog/media/2011/07/57833659-In-Gold-We-Trust-061411.pdf

So: $79, 483, 576 divided by .945 (a step which I forgot), then divided by the number of shares fully diluted, and you get 24¢ a share, or @10P/E, ~$2.40. (this assumes 10g/t @700tpd) Not a huge difference.

For now, Netolitzky seems content to attempt shoehorn the mill data to conform with the overly-pessimistic PEA of 2008, rather than the more optimistic appraisals in the corporate materials. Never mind taking into account the bull market in gold.

At least the insider buying has stopped(haleluja), and the latest news release on the North Lake acquisition does not conform with a typical news release, as its really quite comprehensive. (I'm actually impressed.)

-F6