General discussion, page-4272

I clearly should not have tried to simplify what I thought you were saying with Kingsgate in mind. Namely, if it becomes a successful mine again generating lots of surplus cash, its earnings a share, as you demonstrated, effectively would be enhanced by spending money on buy-backs rather than on ill-advised investment expenditure. However, if instead the money was spent on earnings enhancing investments, such as developing a super pit, then that would be preferable.

A company’s specific circumstances, such as its share rating, may also be important factors in deciding whether to go down the buy-back route. Perhaps, depending upon the circumstances, even a buy-back using borrowed money could be a good move.

My statement, “from a tax point of view, institutions usually prefer buy-backs rather than receive dividends, on which they pay tax” was not in response to anything you said but in response to an issue a poster raised. If a company has a market capitalisation of say $100m and cash of $10m and pays a dividend of $10m, then in theory its market capitalisation should fall to $90m straight after the dividend payout. If an institutional investor pays tax on the dividend received, then the overall value of its investment has diminished by the amount of tax paid.

If I have misunderstood, or are mistaken about anything, please correct me.