Thought others long or short LHG maybe interested in the following on the Ambro site:
LHG/NCM: With plenty happening in the sector yesterday, it would be remiss of me NOT to mention this lovely mineral (would not want to offend Mr Young either!) Firstly: LHG. Had an interesting afternoon after Newmont came out and said no interest in a bid for Newcrest when investors thought “hang on, not taking over NCM, it must be…LHG”. Well, stock went into adjust yesterday afternoon late. What happened? When the smoke finally cleared, it turns out that there was a placement of stock at $1.55. Why? Well, the honest answer is “we don’t know” (not something you want to hear). They don’t have much in the way of debt on their balance sheet. Thus, why? Perhaps because they (and JB Were) could. Importantly, Rio did NOT subscribe to the issue: they currently own 16% of LHG. This will be decline to 14.5% post placement, which may or may not raise some debt covenant issues. A few points of observation: Why the deep discount? What does it imply? Perhaps it suggests the stock is tragically overvalued (which it is) or does it mean that there are some concerns about operating profit? Perhaps there are. We are not alone in actually forecasting a LOSS for LHG despite gold being north of four hundred bucks for the first time in seven and half years. Which when you think about it, is bizarre really: how can a company that mines gold, with almost no debt, NOT make a profit with the gold price at four hundred bucks??? Put simply, the placement raises FAR more questions than it answers… which leads nicely onto our FAR MORE PREFERED GOLD WARRANT STOCK NCM. Every man and hit two dogs knew that NCM had a sizeable take-over premium built into the share price. So, when the Newmont CEO came out yesterday arvo and told a journo from Dow Jones that he wasn’t interested in buying NCM up here, the stock naturally tanked. Genuine selling or traders trying to make a buck? Probably the latter if the volume candle can be used as an indicator. Mind you, the news did come out just after lunch. Newmont’s CEO called it “nonsense” and suggested that whenever NEM raised capital (which it is in the process of doing), inevitably, stories about “what is it going to buy now” will do the rounds. The question off course is how much of the rally over the past few weeks has been gold related and how much has been take-over related? Difficult to say really, although bear in mind over the past few weeks; (a) gold has rallied 12-13%, (b) NCM have come out and reaffirmed FY04 profit and, (c) stated that Telfer will make a significant contribution to NPAT in FY05. Thus, logically, you’d think most of whatever take-over premium was in the stock, probably got sucked out of it yesterday. Then last night, with gold through the roof, LHG decide to make a placement at a 12% discount and NCM will do what? Continue on it’s merry way north I’d suggest… Over to you.
LHG
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