Ann: Maxwells CEB Progress , page-11

Ocracoke, following and commenting on stocks I've no position in is very rewarding... it ruffles feathers, brings in new posters, increases everyone's understanding through wider debate, and provides a benchmark for comparing stocks that I do actually own.

There are no better gold stocks right now to be following than Integra. It's fascinating viewing.

However, if you look at the chart below of the ratio of the HUI index versus bullion, gold stocks have provided absolutely no leverage to a rising gold price since 2003 for investors... they've been reversing in a bad way, in fact.

Why the contradiction? For two main reasons, imo... excessive share dilution and falling grades as a rising gold price makes uneconomic ore economic. As grade falls however, more capital investment is needed to increase throughput just to maintain production levels. More investment leads to more share dilution meaning share prices continue to lag.

This disease has afflicted most of the gold mining industry for the past 9 years... and, in my view, there are signs of this happening to IGR... note how they're now talking about 2.7 gpt throughput, meaning 80,000 oz annual production not 100k at 1mpta.

So how do they achieve and maintain 100k production?.. through more investment of course... just like everyone else is doing.

(except the best of the best who are able to create shareholder value through organic growth by expanding production and maintaining grade at the same time).

http://www.safehaven.com/article/24821/gold-stock-panic-levels