emp, page-7

re: emperors hedging Hi Dub,

I am curious about your reasoning re hedging here.

Firstly I cannot see how there is a COST to EMP for their hedging - its a matter of profit not earned. Sure its a matter of perception and the direction from which one sees the matter, but its the view I have from my position as against yours.

The reality is that at the end of the day it is cash flows or potential cash flows that drive the valuation of a mining stock. Cash flows are driven by earnings less cost outflows. Whilst earnings are affected by hedging, they are also affected by mining costs, exploration, capital, debt, etc, etc. At the end of the day the type of stock such as SBM and to a lesser degree EMP that are seen as unhedged producers can also have high operating costs such that real cash flows are not that high.

I would prefer to invest in a mining company that has significant cash flow and can grow as an entity via exploration and acquisition much more than a company with low cash flow like SBM. The last two years for SBM have been a cash drain and I believe their balance sheet would be shot to pieces by now.

The balance against this is that producers with high hedging do not have the same gold price upside. My take of this is that is that there is also an additional complex mix of exploration upside, new mine development plans, etc, that adds to the investment attraction of a gold stock. A gold stock can be highly hedged, but if it growing reserves via exploration, etc then the hedging becomes less signiifcant.

It is my position that new mine development plans and exploration upside will be a much larger driver for the price of a gold stock than its amount of hedging. (Barring extremes of course)

we all have an different investment focus. It is good to debate and challenge perceptions.......

acturtle

ps EMP has always been a great stock to hold with a rising gold price. I do not hold, so I am ambivalent to EMP's attraction as an investment.