Eureka ReportBack to March 26, 2008 edition March 26, 2008 All...

Eureka Report

Back to March 26, 2008 edition


March 26, 2008

All eyes on resources
By Tom Elliott
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PORTFOLIO POINT: As Lihir chases African gold, and Sinosteel chases Australian iron ore, there is opportunity for canny investors.


Lihir Gold/Equigold. The latest takeover on the market is a friendly bid by Lihir Gold for Equigold’s Ivory Coast-based assets. The Ivory Coast, or the Cote d’Ivoire, and its neighbours may not be the world’s greatest place but they do hold a lot of resources. Lihir’s is a scrip bid so it’s largely Lihir’s shares that you’re getting, meaning you’d be getting a stake in a massive project in Papua New Guinea. It is not beyond the realms of possibility that another gold company might want to look at Equigold and, as I have said previously, in these expensive times it is cheaper for resource companies to buy other resource companies with proven resources than it is to spend time and money exploring. It is interesting then that Equigold is trading at a discount to the bid price, especially as the gold price is, notwithstanding the recent pullback, near an all-time high as well. In the absence of a counter-bid the way to play this is to buy Equigold and short sell Lihir.