smh article

Panic merchants generate golden opportunity
Date: February 22, 2013 - 11:55AM

Gold is in free fall, having fallen about $US100 or 6 per cent in the past month to US$1578 ($A1530) an ounce and, as with most situations where there is panic, there are opportunities for money to be made, a fact that was emphasised by the sector experts your intrepid columnist spoke to.

One area to make money is in explorers that are low cost and have their foot on prospects that are considered high grade. For these miners, every tonne of ore processed contains a relatively large amount of gold, making it more profitable.

One stock that came up a number of times was ABM Resources (ABU), which has a high-grade "Old Pirate" deposit in the middle of the Northern Territory.

"It's very high grade and low capital cost, and should still survive and get product into development even if the gold price continues to weaken," says Alan Martin, a portfolio manager with Colonial First State who invests in small resources companies.

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Warwick Grigor, a principal of the stockbroker and gold specialist Canaccord Genuity, is also a fan of ABM and its "Old Pirate" prospect and explains why explorers won't be affected by a falling gold price to the same degree as producers: “Exploration should not be as vulnerable because for the gold producer it affects profits. Whereas, the explorer is taking ground at $5 an acre and turning it into $50 million an acre. The leverage on discovery and proving an ore body is far greater than a $50 movement in the gold price.” Both say that the producers with the lowest costs will be able to ride the storm best, which means you should be looking for producers with costs lower than $1000 an ounce.

It goes on to other stocks, link below if you're interested.

Read more: htixzz2LaYwZLvrtp://www.smh.com.au/business/under-the-radar/panic-merchants-generate-golden-opportunity-20130222-2evjv.html#