seriously...., page-8

thewogboy,

You can have a look past through thread, but below are some thoughts,

Two different beasts in the same gold rooom.

One is an established, local gold producer with average to high cash costs compared to the industry yet very profitable in the current market.
Focus is more on building from current production from know reserves and resources, using also a combination of moderate size acquisitions, exploration around their production facilities or previous mines owned by the company.
Raised both debt and equity, and some debt remaining.
Unhedged.
Missed recent production targets and cash costs but clear market is focused on future potential. The biggest question and risk here is can AVO sustain their current production (after some very high early life qtr production figures) and meet their target of ~400 kozpa in a few years.
Is more reliant on gold prices, earnings and increasing production.
"Which bank" is buying AVO now.


The other produces squat and will not until 2012,
has less (atm...) resources, operates in a foreign country, yet is now well inside the asx top 100 on paper and interestly becomes the second largest gold company behind the combined NCM and LGL.
Is more likely to be a acquisition target and has already fended off one.
Is focused on greenfields and brownfields discoveries (from the 2nd hand bin of MIM and Xstrata) of both silver and gold, now drilling all year round.
Lowest qtr cash cost of production is likely and potentially close to 0 or negative cash costs with higher silver prices and/or further high silver/gold ratio discoveries.
So far has raised equity as opposed to debt.
Unhedged
Is reliant on gold prices but value is largely driven by meeting or exceeding expectations on exploration which i believe could end up well in excess of 10 Moz in the medium term. Failure for this to eventuate would lead to weakness in an otherwise stable or positive gold price environment.
"Which bank" sold AND down under $2.


So both are leveraged to the gold price but AVO is more production driven where AND has outperformed the gold price and most peers due to exploration success in adding higher margin ounces compared to AVO and others. If your looking for leverage to gold (or any commodity) would go for a mix of producers and exploration stocks to cover this difference. Would also have a look at KRM, AMX, PIR, PRU and OGC out of the +A$100M stocks.