The Austrian Erste Bank has published it's latest Special Gold Report, 55 pgs., in July 2009. Erste Bank is a major Central and Eastern European banking group.

In reading the Special Gold Report, some parts seem to apply directly to the value of owning SFMI. Quotes that follow are from the report:

"In 2008, Au cash costs increased to an average USD 476/oz. produced. ...According to the National Bank of Canada, the Au break-even costs in North America are USD 710./oz.

Due to the massive capital increases of the senior and mid-tier Au producers we expect the gold sector consolidation to be prolonged.

The ratio of gold/silver is currently slightly below 70 and thus more than two standard deviations away from the historical average. As soon as the first signs of an economic floor become visible, the ratio should improve in favor of silver.

(we) expect a decrease in Au production of 10-15% over the coming five years. At the moment, 80mn ounces are produced (each yr.), but only 15mn Au ounces are discovered every year.

The largest gold producers in the past have mainly grown theough acquisitions. The majority of takeovers were financed by capital increases (stock used for buyout rather than cash). ...We expect this tendancy to last; explorers with proven reserves should be of particular interest to the big gold producers.

New discoveries will be gradually smaller, of lower grade Au., and in more exotic and remotew regions.

In the period of 2002 to 2008, cash costs increased by almost 300%. According to the U S Geological Survey, establishing an underground mine would have set you back by an average USD 100mn ten yrs. ago. Today, this amount has probably increased to at least USD 1 bil.

Currently the majority of production of Au is derived from mines that have been operating for more than 15 or 20 yrs. ... Many large mines atr still approaching their expiry date fast. In spite of fivefold increase in exploration expenses, production has been receding for years, and no adequate replacement (discoveries) have been found for the dwindling reserves.

The development of the gold price is strongly correlated with inflation as soon as inflation hits extreme levels. ... When the rate of inflation was climbing to new highs in the USA and Europe at the end of the 1970's, so did the gold price. A similar phenomenon occurred during WWl and WWll and in the Weimar Republic.

We expect that the actions taken by the central banks, which are of historic dimensions, will ultimately lead to inflation; gold should be one of the main beneficiaries of this scenario.

In autum2008 the price of one ounce of gold broke through the S&P 500 index for the first time since 1974. Back then the breakthrough was followed by a dynamic seven year bull market, with the gold price increasing by almost 600%.

More than ever, we consider the gold price in a secular upward trend, and we believe that we have only seen about half of the full swing so far - the most impulsive phase is yet to come. Commodity and precious metal cycles tend to take particularly long, at least 15 to 20 years. Given that the most recent bull market started in 2001, we have only come through half of the cycle yet. This would make our price target of USD 2,300./oz. Au. at the end of the cycle appear more realistic than ever.

The U S budget deficit at a record high, the smoldering inflation risk, and the stepped-up liquidity on the market will form a solid base for the gold price and further increases. Governments around the globe are faced with the agony of choice between tax increases, drastic cuts in spending, or push the "on"-switch of the printing press again. We believe they will opt for the latter solution.

We continue to see an outstanding risk/return profile for gold investments.... The infamous USD 1,000 per ounce threshold should be clearly passed again in 2009, and positive seasonals should lend further support to the price from the third and fourth quarter. Passing USD 1,300 is our first target, and in the long run the price may well pass the inflation-adjusted all-time-high of USD 2,300."