BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

The Kennedy-Nixon debate revisited

October 4, 2006

In the last week of September, 2006, an unexpected confrontation began between the current and previous chairmen of Goldcorp. Robert McEwen built Goldcorp from a $50 million to a $7 billion company, and sold out to Ian Telfer. Mr. McEwen unexpectedly challenged his old company for making a deal with the Reno-based Glamis in terms that reduced the price of Goldcorp from $35 to $22.

Mr. Telfer offered 1.69 shares of Goldcorp for Glamis, and had thereby put together an entity that can produce three million ounces of gold and create an $8.6 billion corporate entity. Since the announcement of the deal, the price has dropped from $8.6 to $6.4 billion, and stockholders are not too happy to see their equity decline about 30 percent. No doubt three million ounces of gold represents $1.8 billion at a $600 price, and over $2 billion if the price of gold goes to $700, and $3 billion if the price of gold hits $1,000.

There have been very few practicing corporate executives besides Robert McEwen who have been forecasting higher gold prices in the last three years. He is a scholar of the gold market, not only a corporate executive, and his vision is usually respected. There is a hitch in the deal. The stockholders of Glamis, who are the beneficiaries of the high offer, can vote as a corporation at a shareholders meeting by the end of October. However, the stockholders of Goldcorp cannot.

From the point of view of corporate disagreement or corporate in-fighting, we are facing the vision of two highly capable executives who are dedicated to their businesses. It is my opinion that this fight is going to evolve into something which at the moment we don't know. Robert McEwen is the largest stockholder of Goldcorp with 1.5 percent, and Mr. Telfer has far less. Institutions own roughly half of the company. Mr. Telfer claims that he talked to the hundred largest institutions which doesn't sound representative even if they supported the deal, because institutions in today's atmosphere, and in fact almost any atmosphere, vote with their feet and vote only for performance. You cannot expect a stockholder to give its vote to a management who lowers the price of the stock. Frankly, representation to that effect is questionable.

In the last five years, we have been witnessing legal interference in corporate affairs when the democratic interest and right of stockholders is not respected. A vote is a vote, and it is very difficult to envisage a system that would give its blessing to a non-vote suggestion by management. Somewhere along the line, something will happen.

From the point of view of the stock exchanges and the point of view of the mining industry, a lively debate of the vision of Mr. Telfer and Mr. McEwen is highly desirable. These are two people who have built organizations, delivered value raised money, and are constantly searching for opportunities within the mining industry. It is basically bullish for gold, bullish for the mining industry, bullish for the stock exchanges, and bullish for investors, because the two people are basically constructive and influential people. I would rather speak about the Goldcorp restricted proxy fight, or maybe even a full-scale proxy fight, or the various mergers and the various interests of these two individuals. Mr. Woodward's recent book STATE OF DENIAL should not enter Wall Street. Losing money is never good!

We live in an age when we hear on the front pages of the Financial Times, the front pages of the New York Times, the front pages of the Globe & Mail, about what I called
"THE PROBLEMS".

The journalists and writers are to some extent not in what I call the regulated world. It's better to live in a world where two dedicated, ambitious, hard-working and hard-hitting executives in the gold mining industry express their opinions, and while they express their very different opinions they build companies.

No doubt Mr. Telfer has done a lot of good for Goldcorp after Mr. McEwen has done a lot of good in creating Goldcorp. No doubt Mr. McEwen may create a whole series of positive news with his new corporate entities like U.S. Gold and other investments in the mining industry. He is positioning himself to benefit from $1,000 gold in a thousand different ways. At the age of 56, his time is probably taken up with nothing but constructive attitude towards our gold and our monetary problem.

Forty-six years ago, two men in their forties had four debates on television. There was very little difference between them. They all stood for a strong America. They all stood for standing up to communism. They all stood for what was important for the Western world in the Cold War.

I cannot help but wonder about this confrontation or a friendly confrontation, as I like to call it, between Mr. Telfer and Mr. McEwen. However, it will resort to the same sentence that President Kennedy used in his inauguration in January, 1961:

"My fellow Goldcorp stockholders, ask not what you have done
for management but what your management has done for you."

Andrew Racz

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

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