good read on gold last paragraph bgf

Gold stocks shine again
By ANTHONY BLACK
18sep05

THE price of gold is expected to rise creating, investment opportunities in listed stocks, according to analysts.

The precious metal has risen from US$413 an ounce on May 31 to US$458.63 yesterday. Bullion was trading at US$373 an ounce two years ago.
And a rising price has been reflected in several gold stocks posting healthy gains. The share price of Australia's biggest gold producer Newcrest Mining has risen more than $5 in the past 12 months to close at $19.45 on Friday. Lihir Gold has gone up more almost 60 per cent in the past year to finish at $1.63 on Friday.

Gold is rising in response to higher oil prices weakening the US dollar and growing concerns about America's twin deficits – budget and trade – exacerbated by Hurricane Katrina.

The price is also being driven by increasing demand from India and China, while global mine production is falling.

Angus Geddes, a director of research house Fat Prophets, said gold should rise by more than 10 per cent during the next 12 months. It was already at 17-year highs.

"It should be well north of US$500 an ounce," he said.

"Investors are moving back into precious metals and this trend is gathering momentum. Platinum has trebled in price in the past five years and silver has almost doubled."

Mr Geddes said a stronger bullion price painted a bright outlook for several gold producers with proven track records.

Mr Geddes said Lihir Gold was expanding production at its flagship mine in Papua New Guinea and switching from fossil fuel to geo-thermal would save the company more than US$15 million during the next 12 months. Mining higher grade ore bodies would boost profitability.

Mr Geddes said Lihir should be mining close to one million ounces by 2007.

He said the Lion Selection Group offered diversification as it invested in 14 resources companies, of which most were junior gold firms with good prospects.

Stefan Whiting, of ABN AMRO Morgans, said Newcrest Mining owned the world-class Telfer mine and he believed today's share price was under-valued based on assets.

Mr Whiting forecast that Newcrest Mining would lift earnings per share from 45c this year to 66c next year, followed by $1.03 in 2007.

Newcrest was a take-over target and that could drive up the share price, he said.

"Newcrest is the last big Australian gold miner," he said.

Mr Whiting said Newcrest would appeal to international gold miners as a "source of growth or resource replenishment."

Richard Morrow, a director of E. L. & C. Baillieu, said Victoria was on the brink of another gold rush.

Mr Morrow said Perseverance Corporation, Ballarat Goldfields, Bendigo Mining and Leviathan Resources offered good prospects.

"Victoria's come from nowhere to being the hot spot of gold development," he said.

Mr Morrow said he expected gold stocks to rise on the back of a higher bullion price.

"But gold, by its very nature, is a speculative investment," he said.

Mr Morrow said Perseverance Corporation should extract more than 100,000 ounces a year, using the latest technology, from its mine in northern Victoria.

He said Ballarat Goldfields had "six million ounces in the ground" and was expected to extract about 100,000 ounces a year. Production was about to start and should grow over time.

Mr Morrow said the company's market capitalisation had increased from about $10 million to about $210 million in 18 months.

"It's a quality company and management has done a great job so far," he said.