I think money is in the ETF's as in the metal, because it's perceived as a safer bet than getting into the miners, which is in reality is highly risky (if not from dilution from geograpical risks, low grades, bank loans etc etc) but potentially offers far greater returns, which only fiat expansion can deliver, with an upgrading of ounces under the ground against operating costs which are largely already accounted for, the reducing costs of scale.

It becomes a greater attraction as the risks disappear, leaving the leverage against the rising cost of the metal.

Investing in a producer is better than investing in an explorer, but while they're getting their act together there's all the ancst about debt and dilution to live through. Newmont holders were diluted substantially a few years ago. CDE - GSS both cases of mergers and acquisitions taking place while the company shores itself up tossing shareholder interests up in the air.

A 50 year mining life is great, but not everyone wants to be hanging around that long with them.

For instance, Hambledon Mining listed in London will be producing 100k ounces a year by 2014, currently moving off 20k pa to 40k pa. Has just diluted shares of 540m outstanding, by a further 40% NOW, because they want to introduce processes which will ultimately cut operating costs by $120/oz. This represents a reduction of 15-20% of costs by expanding the float by 40% now, when they could address the operating cost issue in 2012,3,4. Their own forecast indicates profit's of 5 cents share next year, which with a p/e of 20 is worth £3.45. Instead of waiting for some of that they've offered funds shares at 4p each, now, which has just crippled the share price, only 7p as of a week or so ago, to create £9m to spend on their cost savings.

The only reasoning I can think of for doing that is the level of debt they've taken on to target 100k ounces a year, and a cost reduction now gives them a better opportunity to pay it off. The only positive thing for shareholders being the rising price of gold, which hopefully will rise well over $2000/oz by 2012.

This is why people prefer the ETF, without new mines industry would be in trouble but mostly we're paying for it. Those companies with virtually no debt at all and no plan to dilute shareholders are my top favourites.

AP