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DRDGOLD Ltd. Message Board

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  • jermarge2000 jermarge2000 Jan 10, 2004 5:05 PM Flag

    This stock is trash because

    Baldy, some basics...

    The theory is that a mine that is only marginally profitable at present levels is hugely leveraged. Example; You are mining and processing 1 ton of ore to get 1 oz of gold and it costs you $390 to do that. Suppose that gold is $400/oz so you manage to eke out a $10/ton profit. Your stock is presently trading at $4.00/share.

    Now suppose that gold goes to $410/oz., a mere 2 1/2% move in the price of gold. Assuming that your mining costs are roughly the same from one day to the next, you are now making $20/ton or double. Since share prices tend to maintain a price to earnings ratio, if your profits double, your share price doubles.

    Further, as the price of gold goes up, it makes previously uneconomic ore bodies profitable, adding further value to the share price.

    If you have never seen the exponential explosion of a gold share price, stand by, you soon will!

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