Moydow Mines fka MOY

[bayview3]

This is an except from miningwebs interview with Pierre Lassonde posted 7/7/2002.

http://m1.mny.co.za/422567CB004DBB8F/$All/4225685F0043D1B285256BED0053626F?OpenDocument

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MININGWEB: What metrics do you think precious metal investors should be focusing on to discriminate in their stock picking?

PIERRE LASSONDE: This industry has a number of metrics that are reported and comparing numbers from one company to the next is not always easy. In my opinion, the most important “metric” is management – look at management’s track record and it will tell you a great deal about the likely future of the company.

In addition, I think “Total Cash Costs” and “Total Production Costs” numbers are extremely important, along with the amount of “Cash Flow Generated by Operations”, as reported on the company’s cash flow statement. Other key metrics include reserves and mineralized material not in reserves, not only in aggregate, but also considering where the reserves are located from a geo-political perspective.

More recently, increasing focus is being placed on calculating the “option value” attributable to a company’s reserves. This metric, which is not quite as easy to calculate as those described above, is essentially the value of a long-dated call on higher gold prices owned by the company as a result of having ounces in the ground that can be brought into production. I encourage all readers to review this approach to valuing gold mining equities because it is able to provide one of the most accurate valuation models and best explains the “valuation gap” between traditional discounted cash-flow analysis of gold assets and the premium at which these generally trade. One of the most insightful articles in this regard was authored by Barry Cooper from CIBC World Markets and is titled “Eureka! A Better Valuation Method” (February 1, 2002).

One final metric that I encourage investors to look at is liquidity. You want to invest in a stock that is liquid and marketable so that you can get in and out of the stock when you want to without having a material impact on it’s price. As you know, Tim, Newmont is the most liquid of all gold stocks.


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I have asked CIBC for a copy of this report. Moydow should be evaluated by this "option value" method. If Pierre evaluates it less than this, he should have to justify why to the company, the analysts and the shareholders.

Earlier in the same article he stated.
"At Newmont, exploration is one of our core competencies and we have an excellent track record in finding and replacing reserves. Over the past twelve years, our historic cost of finding an ounce of gold has averaged approximately $15 and this created tremendous shareholder wealth. One of our goals this year is to replace reserves after production of approximately 7.5 million ounces. However, Newmont has also used mergers and acquisitions when they have made sense, as evidenced by the recent three-way merger."

This $15 figure is Newmont's cost per oz for their own in-house exploration. Exploration companies like Moydow do all the work and take all the risks. The oz's they find are worth more than $15. Especially a key deposit like Moydow's.