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The point is that most gold mining companies have mine life of 5 to 10 years, if they're lucky. LGL could triple production and still be mining for 20 years. They have indicated an intention to continually ramp up production, by adding capacity. Unlike some pie-in-the-sky operators, you can see how LGL can actually do it.

Therefore, their PE (based on present sp) is unlikely to be 29 in two or three years.

By 2010, they will probably be producing 1.2m oz p.a. While they are subject to cost increases, like all other miners, their costs have remained consistently well below industry average.

Here are some things to consider:-

- Every $US50 increase in the gold price equates to around $37.5m of additional profit for LGL, at present prices. That's without doing anything other than what they're doing at present.

- Every 100,000oz increase in production equates to about $US50m additional profit (at $US790 - $US290 = $US500/oz margin).

- If, over the next year, LGL both increases production by 100,000oz and the gold price increases by $US100, LGL will add approximately $110m - $135m p.a. to profits.

Of course, you need to believe that gold prices will continue to rise in the medium term, otherwise you would not see the value.

For comparison, many do not see the value in WOW trading on a PE of 29, or Woodside at 27.5. The high PE reflects the market's expectation of potential growth rates over the next few years.

To be fair, LGL has (as do all resource stocks) an "excitement" premium, which always comes into play when the underlying commodity is on a tear. Were gold to seriously reverse course, obviously LGL would do the same.