Zeev's Turnips Patch-No Politics (ZEEV)

[gary schrimpf]

Bullwinkle:

<< I am interested to know how a low extraction cost of $75 per Oz can be considered a detriment as compared to another producer's extraction cost of let's say, $200 per Oz? Is it that the more that's produced the higher the associated costs? It seems to me that the less it costs to mine the stuff the more profit that can be made... What am I missing here?>>

The math on that one is fairly simple. Lets say your present stock holdings are in NEM and NEM's cost of extraction is $200 per ounce vs. $75.00 per ounce for MYNG. (Everyting else remaining equal)

Therefore if the POG goes up to $600 from its current $400 NEM's profits will double. ($400 per ounce vs. $200 per ounce)
Hence, in theory the stock will double in value at that point based on profitability increase of 100%.

Now, using the same scenario, MYNG is already profititng (so to speak) $325 per ounce. If gold goes up to $600 per ounce their profits will only increase 62%. Hence, that should work out to a theoretical stock prince increase of that 62%.

Sorry for taking so long to answer. I was out of town today.