Company Value Proposition

Walter Schloss Passes On

“This approach,” the authors wrote, “leads them to focus almost exclusively on the published financial statements that public firms must produce each quarter. They start by looking at the balance sheet. Can they buy the company for less than the value of the assets, net of all debt? If so, the stock is a candidate for purchase.”

If your gold company has no debt and is literally digging money out of the ground, then what? You can call the cost of growth a developmental deficit or debt, but this will be covered by fixed costs over 10 years, or on an ongoing basis. First, you have to establish the correct geology, and start mining at the outcrop. You also have certain investments which will have occurred over time not covered by costs. The rest is net and comprehensive earnings.

On a theoretical basis, a decline in interest rates below 0.5% will set Net Present Value of any company exposed to either currency risk or heavily indebted below zero (well behind inflation) in an exponential decline, while gold companies without debt and hedged by default against currency risk by producing gold rise spectacularily above zero in the same interest rate regime.

Of course, I'm just making a major assumption and haven't yet been proven right. The gold price would have to double from here to make this assumption correct. I believe the long term average gold price will reflect something similar to price fixes in gold some 70-80 years ago, except that prices will be sustained @ ~100X the price fix of historical times.

Bloomberg News

Net Present Value Comparison