Gold Price Forecast

Here's a gold price forecast that I agree with. What that might mean is that gold prices could see an average of around ~$1800/oz. for Q1 fiscal 2013, looking forward through to 2013 which will commence in two weeks' time. That kind of price will probably lag the nominal price, but the industry benchmark is now ~$1200/oz., well behind the 34-week EMA. Even the "worst case scenario" of the 89-week EMA has been left behind.

GBN.V

The success of GBN.V depends directly on higher average gold prices, and accumulation of free cash flow over and above operations and developmental requirements. For instance, the Komis mine will yield less in grade, but more in tonnage, thus a higher gold price will make up for the difference.

Similarily, the historical information on the Lloyd mine (bingo deposit) looks to be more factual than the technical reports and available information to date, claiming 12g/t over a larger strike length than they are actually mining.(Bingo Technical Report) Likely this deposit will not yield better than the Seabee mine once we see mine expansion. Thus it requires generally higher gold prices.

So if you have a much larger deposit, but lower in grade by half, this would require a number of contingencies such as higher gold prices, but also more processing. An example to go by would be that the company is expecting 10g/t overall grade, and as a minimum for underground purposes. But if the gold price manages an average price 40% higher (which is very highly likely - the price will have doubled over ~$900/oz.), then you can mine underground @6g/t.

We don't have any available information on exactly what the formerly titled Bingo structure looks like, except for one example posted long ago, or any information on the expansion of the mine, which should be well-developed by now, nor do we have any information to go on about how they plan to increase the size of the mill, nor do we have any technical information available to us on Komis as an open pit, save the original technical report and the assumptions in the Pre-Feasability Study.

Attempting to piece all of this together will frustrate even the best analyst who might not think it worth their while.

Forecast

The following chart outlines the price expectation a few weeks' in advance, which is by now far beyond the company "limit" of ~$900/oz. and the industry standard assumption of ~$1200/oz.

On gold price advances and a very low 3-month treasury yield, you can expect that gold mining companies share price will lag gold but see a greater internal rate of return, and higher net present value of their projects. (as has been the case)

Gold companies should plan to pay out dividends(or at least begin to give some guidance) in this scenario, because this will qualitatively change any possible assumptions used in a dynamic hedging strategy that undersells the stock and parries in favour of treasuries.

Paying out a dividend tilts the table in favour of the miner and tax-advantages the shareholder, who might not ever see share price appreciation beyond inflation and currency devaluation. And if central banks themselves switch to buying gold out of the market, rather than say, treasuries, then hats off everyone.

source: http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=37176#p37176

If this one particular model proves correct in its assumptions, then people will be convinced finally that the gold bull market is here to stay, and that miners can provide a dividend despite the risks associated with equities, and miners in particular.

You could probably throw a dart at any profitable gold miner and expect a return, as it was during the short-lived uranium mania. People are only looking for a trade in bubble or mania-like conditions, and so far, only the largest miners have provided this along with the equities rally.

http://www.sharelynx.com/chartstemp/GoldeWave.php

-F6