why share weakness?, page-2

Hi Ed,

I posted on this a little while ago and it's interesting as it looks like you're coming from a UK perspective (I'm coming from an Aus one).

Let me play negative and look at some downsides:

1) gold price falling. This to me is the biggest difference from 12 months ago- the fear that gold may have peaked and be falling back.

2) all quiet on the western front. We're expecting an announcement on the 25th, but a brief note saying they'd fixed the ball mill problem would have been helpful.

3) local politics + issues. A Dash-8 crash in PNG may have put people off, and there are occasional rumblings of discontent from the solomons now and again, nothing recent though (I read the solomon islands and PNG daily newspapers to track this).

But really, that's the worst I can think of. I thought last Q's output was pretty solid and on track for >120koz this F.Y., which I thought quite good. What's the market cap? 300M pounds or somesuch? Not bad for a company that's actually producing gold (as opposed to merely exploring for it).

While I don't necessarily trust broker estimates, I was pleased to see your quote of 320p roughly in line with my calculations. So I'm either not a complete idiot or not alone in being one.

Here's a comparison for you. Newcrest's statement came out yesterday (hmmm they've had rain and equipment problems too). They're trading on a large-ish P.E. of 26 with a capitilsation of , by my calculations, 60x Allied Gold. The cost base for NCM is a little better but not much (550 vs 700/oz) Newcrest produces 3Moz promising to go to 5Moz. Allied is (admittedly just on the cusp of) producing 120koz going to 200koz. So that's a factor of ~25 there. OK I'm cheating and ignoring NCM's copper output.

Also, I'd note that a bunch of options issued on 31 Jun 2011 would only come into play if the share price was above 256p for 5 days. That, I suspect, gives you a feel for where the company execs thought the share price would be.

Anyway, see you next week, the announcement should be Tuesday, I think.