Sakata

Comparing and Evaluating the Gold Indexes

On Mar 12 04:21 PM Loriewil wrote:

> Sakata,
> When you get your junior mining stock indexes completed I would appreciate
> you sharing them with me (and perhaps in an article posted on seekingalpha).
>

I appreciate that but it will not be that easy. Creating the indexes is relatively easy. Anyone can go to the TSX pages and get all the stocks. It is the Excel programming which will keep them all in sync which would not be possible to publish in an article.

Comparing and Evaluating the Gold Indexes

An interesting article, but the only really important thing it says is that the first four indexes are, for all practical purposes, equivalent and of little value if you are interested in junior mining stocks. The fifth of these, while more useful for junior investing, is broader than the PM market.

For several months now I have been trying to put together my own indexes for the various subsector of the junior mining industry. This is very possible to do using Excel and letting it download the info on all stocks overnight. Separate indexes for production, exploration, Toronto-listed, Vancouver tier 1, tier 2, etc. leads to very interesting possiblilities. Unfortunately, due to limited time available, I have not got perfected my algorithms but I hope to have it done later this year when I expect that some of these subsectors will really take off.

Knowing how each individual area within the PM is behaving will, I hope, allow me to fine tune my investments and direct my efforts in the area which are likely to be most productive.

Tom Winmill on Gold: Recent Performance Due Mostly to 'Fear Factor'

I have to say that this article sounds more like a sales pitch than a well-considered evaluation of the gold market.

Why Gold Miners Aren't Glittering

I may be way off base here, but I suspect that the reason some analysts have it wrong is that they are trying to evaluate miners using traditional means. This just doesn't work. There are a huge number of variables affecting the profitability of an exploration company but many of them are somewhat nebulous. How, for example, do you evalution management expertise, a key factor in the success of a junior?

For producers the profit margins are affected in a big way by a relatively small change in gold price. For example, if production costs are $600 an ounce then profits increase by 100% when gold goes from $800 to $1000 ( a mere 25% change). I doubt many analysts are willing to bet gold will be much above $1000 in the short term, hence there low predictions.