The Australian share market was down almost two per cent at noon...

The Australian share market was down almost two per cent at noon as concerns about the US and European economies and increased regulation combined with worries about a slowdown in China.

All Ordinaries index slipped 80.6 points, also 1.66 per cent, to 4,769 points.

Analyst said "We had a weak lead from Wall Street on the potential moves from China to slow things down, and Mr Obama is going forward on bank regulation. There was a confluence of events. We had a good run over the Christmas period, so maybe there's just a little unwinding of some Christmas excess."

Lihir Gold Limited (LGL) has reported a 27% jump in gold production in 2009 to 1.12 million ounces. Despite the increase, the company produced more than a million ounces for the first time and production still came within the previous guidance offered by Lihir. The second largest gold miner listed on the ASX, Lihir produced the overwhelming majority of its gold from its Lihir Island project off the coast of Papua New Guinea. Lihir Gold reported a profit of $157.7million for calender 2008.

Australian Agricultural Company Limited (AAC) expects to post a loss in the range of $53-$60 million for fiscal 2009. The beef cattle producer said the financial results have been negatively affected by extreme climate and external market factors. AACo reported a 38.72m loss for calender 2008.

Woodside Petroleum Limited (WPL) reported an 18% quarter-on-quarter jump in revenue to $1.26 billion in the fourth quarter. The results come on the back of higher prices for crude oil, despite sales volumes only increasing 1% and the company reporting a 2% decline in production over three months. The company reported $1.26 billion in sales revenue for the fourth quarter, a 23% fall from the previous corresponding period. Shares in Woodside Petroleum are down 1.96% to $45.

All indexes are in the red at midday, however the one declining the least is the Health Care index down 23 points at 8,326.

The worst performing sector at midday is the Materials index, down 307 to 12,294.

Gold is trading at US$1,094.40 an ounce and the Aussie dollar is trading at 90.09 US cents.

AQP: In at 6.65 and out at 6.81 in the morning.
RIO: In and out for small profit(Perhaps keep at close)
DDT: Two trades with nice profit

http://www.marketwatch.com/
http://www.thebull.com.au/
http://www.news.com.au/business/

Mining stocks also offer weight to commodity prices.

Take a gold mining company as an example.
Assume we have a company that mines gold for a total cost of $400 an ounce, and let us pretend the gold price is $500 an ounce.

The net present value of the mine would be calculated based on the $100 margin. If the gold price increases by 20% to $600 an ounce the net present value of the mine will double, since the margin would now be $200 an ounce.

Thus the value of the company increased five times more than the increase in the gold price. Most people buy mining stocks because of this leverage.

What should be immediately evident is that if you pay more for mining stocks than what they are worth, on the speculation that the price of the underlying commodity will increase, you are merely gambling on the commodity price.