##pricing gold/commodity shares##

The market is badly mispricing these companies. They should not be priced like traditional industrial companies on a simple P/E valuation.

Resource stocks, IN ADDITION to any profits they make, have as their assets the gold, oil, nickel or other resources they own.

These companies should be valued by the market on the basis of the value of their resources minus the cost of producing it.

Any other method is badly undervaluing the assets that the company owns. In addition, estimates of the value of ongoing exploration needs to be taken into account.

At present our gold producers are going on the cheap, with massive discounts based on the value of their gold in the ground.

As the gold boom gets fully underway this will change and valuations will better reflect the gold assets that a company owns, not just how many dollars profit it makes from mining and selling a percentage of its assets during the year. The value, and increases in underlying value of its assets will also be taken into account.