when gold goes up trouble is on the way, page-17

gold stocks - particuarly the mid-cap / juniors will be where the fortunes are made.

Let's say you own the physical (current price $900/oz) and it goes to $1500/oz this year. You made over 60% gain - great.

Let's say I own a junior for $45 /oz (Aussie terms) - take Conquest. Extraction costs - mainly oil, will be 30-50% of the cost depending on the depth of the mine. Conquest will be an open pit mine so cheaper end of the range and assuming gold keeps to its 10:1 - 15:1 price range to oil then revenues will alway far outway the increases in oil prices / costs.

So on current prices, I have a quality company that would be bought out by a major company (JV with Goldfields) for $200-250/oz on most buy-out metrics if it achieves greater than 2 m /oz reserves & is an open pit mine (which is already the case). That buy-out metric is based on $800/oz gold. So if the gold price goes up to $1500/oz then I would expect that to be $400-$600/oz. Let's not forget the scope for my junior to find more reserves during that time.

Overall, I'm looking for at least 10x leverage versus the 60% quoted above based on the above price assumptions.