question re gold co valuation methods

The following story on kitco yesterday (last paragraph in particular) got me wondering what multiple of annual earnings is generally used to value Australian gold miners ??? . . . . if the Chinese example cited of 15.6 x is used on Oz juniors, they become VERY underpriced . . . let alone that the Chinese example then traded up an additional 70% on opening day !!!!


~~~~~~~~~

HONG KONG, Dec 23 (Reuters) - Shares in Fujian Zijin Mining Industry Co Ltd (HK:2899) soared more than 70 percent on their Hong Kong market debut on Tuesday, after investors piled into the gold miner amid sizzling demand for China stocks.

The company, based in China's southeastern Fujian province, raised HK$1.15 billion (US$147.44 million) in an initial public offering that was 744 times subscribed by retail investors, making it the most popular IPO in Hong Kong since 1997.

Zijin shares were trading at HK$5.70 by late morning, versus their offer price of HK$3.30 each. The blue-chip Hang Seng Index (HK:1804580) was down 0.07 percent.

Their debut was given added zing on news that South Africa's Gold Fields , the world's fourth-largest gold producer, had taken a 1.4 percent stake worth US$7.7 million in the firm. Gold Fields said it would also invest US$500,000 in a venture with Zijin to explore and develop gold properties.

"A strategic partnership such as this one should give it momentum," said Ben Kwong, associate director at KGI Asia Securities. "Investors are hot for this kind of commodity play but a lot of trade is speculative," he added.

Recent China IPOs have drawn huge demand from investors eager for broader exposure to an economy growing at over eight percent a year. Small Hong Kong investors, emboldened by impressive first-day gains, have lined up outside banks to apply for shares.

Investors are also banking that firm gold prices , which are trading near eight-year highs, will boost Zijin's earnings. Although bullion prices are supported by U.S. security concerns, making them volatile.

China Life Insurance Co Ltd (HK:2628) (LFC) , the country's top life insurer, made its debut last week after raising US$3.46 billion in the world's largest initial public offering this year.

Investor demand for Zijin's public subscription beat the recent offering by Chinese vehicle maker Great Wall Automobile Holding Co (HK:2333) , in which retail buyers subscribed for 683 times the shares available. Its shares soared 28 percent on their first day of trade earlier this month.

The level of interest also surpasses that seen when tycoon Li Ka-shing listed his Internet firm tom.com Ltd (HK:8001) in 2000.

But it still falls short of the record set by Beijing Enterprises Holdings Ltd (HK:392) , a conglomerate backed by the Chinese capital's city government.

The latter attracted orders for 1,276 times the shares on offer to retail investors in 1997.

Zijin's share offering, the last to hit the Hong Kong market this year, brought the volume of 2003 IPOs in the city to HK$54.79 billion, surpassing the HK$52 billion raised last year.

LIQUID GOLD

Zijin, the first gold mining company to list in Hong Kong, plans to use proceeds from the IPO to acquire additional gold resources in the central and western parts of China.

The company aims to boost its annual gold production to 15 tonnes by 2008 from about 10 tonnes this year.

Zijin sold 348.3 million shares, or 27.5 percent of its enlarged share capital, for the IPO handled by China Everbright Capital Ltd.

The firm raised the retail portion of the deal to 50 percent from 10 percent due to the oversubscription. The institutional tranche was 21.2 times covered.

"I think it's a fine company but it's difficult to value," said Samantha Ho, a fund manager at Manulife Asset Management, which bought into the IPO.

Zijin sold its IPO shares at 15.6 times its forecast 2003 earnings on a fully-diluted basis, making it cheaper than Jiangxi Copper Co Ltd (HK:358) , China's second-largest copper firm. It expects to post a net profit of at least 280 million yuan (US$33.82 million) this year, more than double 2002 earnings.

~~~~~~~~~~~~~~~