TO BUY OR NOT TO BUY? MASSIVE REVENUES COMING

GOLD MINING COMPANY’S SET TO RECORD MASSIVE REVENUES AND PRICE ADJUSTMENTS. BIG BUYERS STRATEGY TACTICS BY SOAKING UP SMALL CAPS SHARES

Gold companies are set to reap unprecedented revenues and profits from this unimaginable rise in Gold, to be now heading to $US3,000 per ounce. Analysts and promoters have been forecasting these prices for the last 30 years and most of the promoters of this rise in Gold price, themselves, cannot believe its actually become a reality. Most in reality were just hyping and hoping. The end $10,000?

So the question is now. What is the limit to the Gold price? Most analysts and financial, markets, commentators and institutions, all firmly agree and all believe that the Gold price is set to record a price far in excess of its current price of ~$US2,000 per ounce. With global currencies fluctuating and global Government treasuries and banks printing money as quickly as the printing presses can manage, the only true thermometer of wealth now, is Gold. It has been for centuries and still is today.

With the quantity of cash and bank notes being printed today, at an alarming rate the value of money, as we know it, is going to be diluted, it has to be. The world is being swamped by cash money. There is so much cash money being printed that if Geoff Bezos wanted to cash in his Billions the US Government could not provide the bills to pay him. The US Treasury could not print fast enough. The presses, are rolling 24/7 just to pay for the current stimulus packages, in the TRILLIONS of dollars. Just for the record a Trillion dollars is a “Thousand Billion Dollars”. I’m not sure how quick the treasury of the USA can print a Trillion Dollars but would certainly be quicker that the Australian Treasury.

THE QUESTION IS, “WHEN DO YOU BUY INTO A GOLD COMPANY”?

The question is so obvious and the answer is so obvious. “At the time you can multiply your investment the most”. There are two only choices to this question. One is to invest in the companies that are already in production with a history of good sound management and making a profit now, or invest in the companies that will be coming into production in the near future, that has in your opinion, have good sound corporate and management skills. Assuming that both have ample gold resources.

What is considered ample Gold Resources – In todays GOLD world

Today a company that has a Gold resource of even of 100,000 of Gold, has an inground value of $A260,000,000. A company today, no longer needs to spend all of its cash in this market, to prove a million ounces. Those days are history and are relic theories. It is clearly a waste of time, money and effort to increase your inground resources of Gold, until you are in production and making pots of money,. Then its time to then use you cash flow to increase the Gold inground resources. The problem is, within the Gold industry, stockbrokers and analysts just haven’t come to terms, that with the current gold price, they just cant the get the big resource story out of their heads. Actually, the market in general haven’t changed their views on what is valuable and what’s not. Markets and players, all need to stop thinking in ounces and concentrate of the Dollar value.

WHEN TO BUY

Any company that has a resource of over 100,000 ounces of Gold is a buy in our opinion.( you do your own investigations). Today, a Gold Mining Company that has a resource of 100,000 ounces or more has an inground value of $260m. Back of the envelope figures: 25% to develop, 10% to build a process plant, 15% to mine and process and 5% for Corporate. The balance in most instances, is the profit. $117,000,000. A quick and simple example, of the power of the Gold today: If a Gold mining Company was to mine the 100,000 ounces and process it within 12 months (assuming no other discoveries or adding to the resource) could have a Nett profit (45% of revenue) before tax of $A117,000,000. This is the power of the Gold price.

We all forget that a little price of Gold that weighs 1 ounce is 1 x inch x 1 inch in size and a 1/4 of an inch thick. (That’s the size of an ounce). Assume the Company distributed a dividend of 50% leaving it with $A58 million cash. Its Market Capitalisation based ratio of P/E of 10 would be $A580m Market Cap. Obviously a few other variables will come into it but its a start to work out the value of a company and what its market cap could be. Obviously, a company would like to have more Gold than 100,000 ounces in the ground before they went into production but wit the current gold price its not an absolute necessity.

SO WHAT ARE THE PRELDICITONS FROM THE “EXPERTS” .TAKEOVER AND MERGER AND ACQUISITIONS ACTIVITY ARE GOING TO BE LIKE NEVER BEEN SEEN BEFORE.

Cashed up majors and mid range sized cashed up Companies, over the next two years are going to swallow minnows and small cap Gold mining companies in Australia, that have any reported GOLD resources.

What is the likelihood of that becoming a reality. Probably, about as sure as the sun will rise tomorrow. Mums and Dad shareholders, day traders, shorters, skimmers, naysayers, analysts are all going to suffer from nose bleed in our opinion. A small cap company that has a Gold resource of $550,000,000 (200,000ounces), in the case of an ASX in Australia, usually have a market capped at around $25-35m. The same Company on the London SX would have a market cap of $75-$100m and in the USA would be around the same as the UK.

Small Caps and juniors (sardines) to get gobbled up by sharks.

No question, small caps in Australia are going to get gobbled up either by Aussie majors and mid caps, or overseas Gold Companies. Overseas mining companies want to swarm into the Australia Gold market.. Unfortunately for them, they can only watch. With all the exploration activity and unprecedented reporting of the current exciting drill results and assays being announced by juniors and because of the Covid 19 virus, overseas predators cannot make a move.

Small Caps getting a lot of attention from Buyers soaking up at these low prices for undervalued companies.

It is quite noticeable, that a lot of small cap stocks, that are way undervalued and trading on the ASX, are having unprecedented high volumes in turnovers, primarily in the junior stocks. It seems though, that even with these massive turnovers in the companies, that the share prices in the juniors are not going in a northerly direction, even after all of this action. Why? Some commentators believe that some juniors, are artificially being held down, so that the bigger players in the market can soak up the shares from unsuspecting shareholders. The thought is, “that if a stock stays down long enough, the average shareholder, will sell and move on, due to non rise in the stock. The theory is, the longer a share price in a junior can be kept stabilised at a low price, the small shareholder will move out of that stock, allowing the bigger players to increase their holding at bargain prices. This is definitely happening and it is quite obvious that this is the latest strategic tactic. After taking out the small shareholders, the players are prepared to wait for the hostile takeovers and mergers and acquisitions, that are coming. This is the $$$ multiplier.

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