RE:RE:Price of Gold is a Killer!MEDICI
Low grade deposits are more leveraged to price. It is a pretty simple concept. Assume a high grade deposit with a total cost of 1000 and an 1800 gold price. Profit is 800 so if the POG rises to 2000 the profit moves from 800 to 1000 or a 25% increase. Now assume a low grade deposit with a total cost of 1600 and 1800 gold price the profit is 200 an ounce. If the POG rises to 2000 then profit rises to 400 so 100% increase. In theory the Stock price should rise faster for the low grade deposit. The opposite occurrs in the case where the price of gold goes down. Assume a 200 price fall the low grade deposit is no longer making anything where the high grade deposit is still profitable. So while the stock price of both will fall the SP of the low grade deposit can drop off the table as there may no longer be any real or perceived value.