Gold Chart ($US) - The Global Speculator

AUSTRALIAN GOLD PRODUCERS COMPARISON
Volume 2, Issue 16, 8 May 2008
www.globalspeculator.com.au
$1,400.00
$1,350.00
$1,300.00
$1,250.00
$1,200.00
$1,150.00
$1,100.00
$1,050.00
$1,000.00
$950.00
$900.00
$850.00
$800.00
$750.00
$700.00
$650.00
$600.00
$550.00
$500.00
$450.00
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
-50.0%
-60.0%
-70.0%
-80.0%
-90.0%
-100.0%
-110.0%
-120.0%
Mundo Minerals
Intrepid Mines
Dominio n Mining
Sino Gold Mining
Lihir Gold
Newcrest Mining
Tanami Gold
Equigold
Avoca Resources
Kingsgate Consolidated
OceanaGold Corporation
Medusa Mining
AngloGold Ashanti
Troy Resources
Allied G old
Crescent Gold
Resolute Mining
St Barbara
Norton Gold
Dioro
Dragon Mining
Monarch Gold Mining
Citigold
Ev Resource Avg EV TCO Avg TCO % Reserves Avg Reserve % NFA% Avg NFA % Linear (Ev Resource)
DATA SOURCE: GOLDNERDS FORTNIGHLY UPDATE (6 TH MAY 2008)
The last component that can have a significant impact on a company’s valuation is its financial position. The yellow line
in the graph is simply the company’s Net Financial Assets divided by its Market Capitalization (NFA%) giving you a
percentage. Generally speaking, the higher this % the more financially secure the company is. A negative % results
when a company has more liabilities and financial obligations than it has financial assets. Whilst your average industrial
company can get away with a highly geared balance sheet provided they have reliable cash flow, this generally spells
trouble in the unpredictable and capital intensive world of gold mining. I have seen evidence of this in the negative
share price performance of companies that become stretched financially. What results is countless capital raisings
which dilutes shareholder value and depresses a share price. Alternatively, borrowing excessively from financial
institutions leads to unwanted gold price hedging requirements and strict debt covenants which can at any time spell
the end of a company that struggles to meet its commitments.
In summary, the above indicators become very useful when scanning across potential investment opportunities. In the
above graph there are horizontal averages for each of the categories we have discussed to give you an indicative
benchmark as to what is normal. When scanning for companies that may be potential investment opportunities, you
start with the EV per ounce and look for companies that sit significantly below the black line. That is, the company is
trading at an EV per ounce that appears to be below what it should be, given the compilation of its reserves and
resources. The next step is to scan up and look at the TCO and NFA for the relevant companies to ensure they are
within or better than the averages (horizontal lines). If they appear to be at satisfactory levels, you may have found an
Volume 1, Issue 4, 5 June 2006
© The Global Speculator 10