re: lsg - perennial Hi perennial,Regarding EAGM or LSG in...

re: lsg - perennial Hi perennial,

Regarding EAGM or LSG in general, a good place to look for information is www.lionselection.com.au. Basically, LSG's first investment in EAGM was in 1998. Since then it has accumulated a 11.4% stake for $10.4M. Though a subsidiary (AFL) LSG also holds a 6.1% stake.

AFL's (LSG owns 16.3%) investments can be found on www.afl.co.za. If you have a look at this site you can get a bigger picture what LSG is all about, strategy & so on. In an investment presentation in Sydney this year, MD Widdup suggested that AFL would also be floated in the future.

This is what Geoff Stewart (MD of EAGM) said about a possible float to miningnews.net prior to the new gold discoveries at Gokona, Tanzania:

"The only reason we're doing it [listing] is the institutional investors have to keep their investments at cost," Stewart said.

"If they're listed they can put it in at market price. They've been in eight years and got in at 20 cents, so they'd like to revalue if nothing else.

"It will be a compliance float, getting together 500 shareholders with the least number of shares we can possibly issue."

Since the new discoveries, the float was put on the backburner.

Now, using valuation criterea such as resources compared to market cap, I recently suggested to Robin Widdup that EAGM would be worth around $350M upon listing on the ASX. I also highlighted some liquidity concerns EAGM stock might have due to the high institutional ownership and basically no equity dilution from the float. He said this:

"The original EAGM plan was to raise around $5 million and get the company listed so that the existing institutional shareholders could sell blocks of stock. In this way, the liquidity would start small and increase with time.

However, this plan was blown away 6 weeks ago with a high grade new discovery 7km from the process plant. The results at Gokona were so very good that the float was postponed to March 2003 or later.

Due to the good exploration news your valuation estimates could be conservative for two reasons:

1. Potential reserve/resource increase
2. Higher multiples available in North American stock markets."

He didn't want to elaborate on this second point.

The final thing I can say about EAGM is the fantastic institutional support it has. And, by buying LSG, you get exposure to this fantastic asset at PURCHASE COST, because this is what the market is valuing LSG's stake in EAGM atm. (NTA is $1.21) - by the way, my opinion now is that EAGM is worth at least $500M, so you can do the maths. Getting back to the point, the shareholders are:

Westpac (14.8%), Macquarie (14%), Geoff Stewart (13.9%), CDC and AngloGold (10.6%), and Lion Selection and African Lion, with 11.4% and 6.1% respectively.

Hope this helps,

I know I've been repeating myself but what can I do :)

Cheers,

J