Hey Mr Z, welcome to the board.

I can address some of your questions, not necessarily with an eye as to why or why not you should invest in GHDC.

1. GHDC gets revenue from any ore mined from their claims. So if SFMI connects the Sinker to the other shafts, then GHDC gets their cut even if the ore is removed through the Sinker (and I think New Vision and Bissell also get a cut if it's removed through the Sinker). SFMI can, however, follow any veins they encounter in the Sinker itself, even if the vein leads under other claims, using quit claims. PQ mentioned this at the SHM last year. So yes, it is in SFMI's interest to mine from the Sinker as much as possible (not from other claims through the Sinker), and bypass GHDC. But if the mill is ever expanded so that its capacity is greater than what can be mined from the Sinker, then it would pay to mine from the other (GHDC) claims as well.

2. GHDC is not leveraged to the price of gold and silver, since its royalties go up linearly with the price. However, SFMI's leverage presumably will not be very great. In your example, going from 40 to 57% profit is significant, but less than a 50% increase (17/40). If the price of gold goes to $3000, then deducting the 15% ($450) and $500 mining and admin costs leaves $2050, or 68% profit- only a 20% increase over the $1800 profits. Even if mining and admin costs were zero, the max profit would be capped at 85% after the 15% royalty. So while SFMI has some leverage to the price of gold that GHDC doesn't, that leverage is relatively small and limited. BTW, that 85%/15% split effectively means that SFMI can theoretically make a maximum of 5.7 times as much as GHDC if SFMI's costs approach zero (or gold goes parabolic). In practice, the SFMI/GHDC profit ratio will be less than 5.7, reduced by SFMI's operating costs.

3. I agree with you that GHDC buying up other speculative properties is not that attractive. IMO, WEM is not speculative. Depending on how much revenue GHDC gets, buying up near-producers or newly producing companies would be a better route to go. Unless, of course, GHDC simply gives out the revenue as dividends. That prospect is one I could endorse!

4. GHDC is tightly held. Both Pierre and New Vision if I remember correctly have loads. And since GHDC has essentially no running costs, there has not been the dilution from the original share count that SFMI experienced, and which would have put the new shares into outside hands.

BTW, I have both. At one time I had about the same number of shares of each, with the GHDC shares bought for about 1/5 the price of SFMI at the time. When SFMI tanked recently, GHDC didn't follow as quickly, so I converted some GHDC shares to SFMI at about a 1:1.5 ratio. If SFMI recovers better and the SFMI:GHDC ratio goes much above 2:1, I'll convert some back. This has been my way of "trading" and increasing my shares without being out of either one or reducing my investment.

spiny