rene's latets on au, page-9

  1. 7,409 Posts.
    Rene really is a fruitcake, either that or he has a hidden agenda (and I hope he is reading this). He's fallen for the most common misguided belief that if the Aussie dollar increases by the same percentage as gold, then it is not worth alot to gold producing companies.

    Well, that's simply not the case, as costs remain roughly fixed. Best way to explain is with an example (in US$).

    If cash cost to produce gold is $150 per ounce and gold is $275 per ounce then the profit is $125 per ounce. At AUS$ of 50c US, this would equate to $250Aus.

    If gold increases to $360 (now) then profit is $210 per ounce and at AUS$ of 59c (now) then profit is $356 per ounce.

    That is a whopping 42% increase in profits, which is more than the percentage increase in gold. Why? Because you have to take into account fixed cost of producing, any rise goes straight to the bottom line. Companies like the emerging OXR with a million ounces of gold to mine over 56-7 years or so, have just increased their profits by $116million.

    I just can't believe Rene is pouring out this trife, surely he should be taken to acount on this very simple arithmetic.

    This is why people are flooding to gold stocks, short-term rises and falls in stocks as Rene has given as examples, are the nature of stocks. Surely even the great realises that stocks don't just continually rise day after day. Another case of fiddling with figures to suit the argument?

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