true gearing of ncm, page-12

Gdennis,

You should look at all-in cash cost. NCM betted heavily on Lihir with $9.5B T/O. I used to be a Lihir holder and sold all my shares at peak, because at that time I think NCM paid too much and single commodity.

It is a single commodity stock with massive debt. IMHO Gold price may go down to $900/oz and NCM will still need to pay interest and debt.

WithOUT debt at least you can stop production and wait. With debt even if stop production, you still need to pay interest on debt. Sons of Gwalia (http://en.wikipedia.org/wiki/Sons_of_Gwalia).

Look at FMG (single commodity as well), when iron ore is making money (eg right now) FMG is aggressively repaying debt ASAP to hedge against downturns in the future.

Booming time = repaying debt & save money in the bank
Busting time = buying distressed assets with cash and/or some debt.

If NCM did NOT buy Lihir during booming time (paid down debt instead), how much would Lihir share price worth now? Definitely not $9.5B NCM paid for (probably something like $1B like most gold stocks fallen by 50-90%).