what would you sell for??, page-18

Nev,

Great response. I have heard and read many theories about why gold should be US$2,000+. And this has been said for many, many years. My only concern is will it ever actually get there? I do believe that the gold price is subject to manipulation.

I agree that if the gold price goes ballistic, the value of IGR should go up... BUT that also highly depends on the exchange rate.

Whilst Gold may be up US$17.53 today (per goldprice.com.au), I notice that it is actually down 22c in AUD.

Everything I read about the US currency also suggests it should be highly devalued due to the massive real increase in money supply in USA. If this happens and gold moves strongly higher, it won't really make much of a difference to IGR given IGR operates in Australia with an AUD cost structure.

People often look at gold mining companies, calculate the earnings and then apply a traditional PE multiple (say 12-15x) to it in order to calculate a share price. It is generally not reasonable to apply a PE to a gold mining company as they have fixed life resources, and fundamentally a PE ratio assume an operation of a business into perpetuity. If you use a PE it should be significantly lower to take into account the short lifespan.

A Discounted Cash Flow is usually used to value mining shares. However, there are so many assumptions used in DCF it can often be fraught with danger.

Analysts are often quite bad at valuing things for longer term. For example, have a look at the broker reports valuing ABC Learning just months before it went under.

With discount rates, I also can't believe the low level of discount rates often used, especially for companies with higher cost structures, as these are much higher risk than a company with a lower cost structure.

Just my additional 2c worth.

Cheers
Marvin

DISC: I hold IGROA