Recommendation by Ambrian's:May explain the action today...

Recommendation by Ambrian's:

May explain the action today ??

Ambrian's gold stock picks for H2 - a AAA rating?

London investment banker and broker Ambrian's top gold stock picks for the second half of the year perhaps coincidentally all also begin with an A - Adamus, Ampella and Avocet
Author: Lawrence Williams
Posted: Thursday , 21 Jul 2011

LONDON -

This is the time of year that London investment banker and broker Ambrian Partners reviews the performance of gold stocks in which it is interested and makes its picks of those it feels will perform best in the second half.

Despite record high gold prices being seen in the first half of the year as the dollar has weakened and amidst the Eurozone crisis and inflationary pressures rearing in China, Ambrian reckons that gold focused mining equities have mostly been flat and suggests this is because of three main factors:

Firstly US dollar weakness has been a two-edged sword. Although it has been a major factor in the gold price increase in dollar terms, the currency weakness has also meant that producers outside of the U.S. dollar environment have consequently had their earnings offset in local currency terms.

Secondly Ambrian notes the effects on operations of political instability, real or feared, in a number of countries where gold is nowadays being explored for and mined. This even overflows into affecting producers in countries where the politicians are implementing, or talking about implementing, taxation and royalty reviews adverse to the industry.

The third main point noted by Ambrian is general risk aversion related to mining equities with alternatives such as gold ETFs and bullion seen as not carrying the same kind of risks as a mining project.

Thus looking ahead to the second half of the year Ambrian has plumped for those gold equities which it feels will continue to grow their profiles through ongoing positive newsflow - although how it actually can forecast this is a little more uncertain. Past positives don't necessarily mean that newsflows will remain positive ahead!

But despite this caveat, Ambrian's top picks for appreciation in H2 all coincidentally begin with the letter A - notably Adamus Resources, Ampella Mining and Avocet Mining. Ambrian's analysts reckon that these three companies all offer value at their current price levels and reckon that all have presented clear and defined plans as to how they will achieve their goals this year and expect that further development of their respective assets throughout the second half of the year will drive their market valuations higher. Incidentally all are operating in West Africa which has seen rapid growth in gold production in a number of countries there and with broadly supportive governments in place.

Specifically Ambrian notes that Adamus hs started production at its Nzema gold project in Ghana - considered a relatively stable and mining friendly West African nation - and also has a substantial and highly prospective package of gold assets making it well placed should a consolidation of gold properties in the Ashanti Gold Belt occur.

Ambrian considers Ampella "one of the most exciting West African gold exploration stories on the ASX." It notes that the company has already outlined a 2.2 million ounce gold resource so far and is expecting a further resource upgrade in the second half. Further Ampella has a considerable strike length to test out which it feels gives Ampella further huge potential.

Avocet, which has significant existing gold production, has also been a good success story to date continuing to meet its production targets, while also maintaining strong exploration drilling programmes on its projects in Burkina Faso and Guinea. The company has being successful in selling off its South East Asian gold assets enabling it to fully concentrate on West Africa. Ambrian says it thus maintains its belief that Avocet is on the way to becoming a 500,000 ounce a year gold producer which would put it nicely into mid-tier status.