Bendigo to be $2.50 again within next twelve months?
Glittering outlook for stocksAnthony Black
July 16, 2006 12:00am
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ANALYSTS are bullish about gold and oil, particularly at a time of Middle East tension, Indian train bombings and nuclear development programs.
They say high gold and oil prices paint a bright investment outlook for several related stocks in the next 18 months.
The gold price has risen by more 30 per cent this year and was trading at more than $US666 an ounce yesterday. Sean Conlan, of Macquarie Equities, forecasts the gold price to be at $US833 an ounce in 12 months.
"The key fundamental drivers of the current rally remain strong -- global liquidity, fund buying and inflationary fears," Mr Conlan says.
"In addition, this week's conflict between Israel and its neighbours, coupled with the Iranian and North Korean nuclear development programs, have also added further impetus to the gold price.
"Given our bullish stance regarding the gold price in the next 12 months, we expect the Australian gold sector to outperform the broader market."
Mr Conlan says Middle East tension is pushing the oil price towards $US80 a barrel.
"But other events are worth noting," he says. "Political issues in Nigeria are placing constraints on Shell's production supply. The US hurricane season is upon us and is forecast to be one of the worst in history. This may affect the oil supply from the Gulf of Mexico. Russian production growth is beginning to wane in response to the Yukos oil company carve-up hampering foreign investment. Demand from China, though slowing, remains robust."
BENDIGO MINING: Mr Conlan put a 12-month target of $2.50 a share on Bendigo Mining, which closed at $1.56 on Friday.
He says the company forecasts production of between 70,000 and 90,000 ounces next year from a resource base of 11 million ounces.
"Bendigo will earn more from a higher gold price because it is unhedged," he says.
AGINCOURT RESOURCES: Mr Conlan says Agincourt is diversified and is increasing gold production to meet growing demand.
"It offers good value and is trading at a discount to its peers of the same size," he says.
LIHIR GOLD: Carey Smith, of State One Stockbroking, says the PNG producer will lift production from 800,000 ounces a year to a million ounces in the next two years in response to stronger global demand for jewellery, particularly from China and India.
"Gold for more than 1000 years has been considered a safe haven in uncertain times," he says. "It can be easily converted into anything and is a hedge against inflation."
WOODSIDE PETROLEUM: Oil at $US100 a barrel is a distinct possibility and Woodside is Australia's biggest oil and gas producer, Mr Smith says. It has big reserves to meet growing export orders.
AED OIL: Mr Smith says AED will lift production from 15,000 barrels a day to 28,000 barrels in the next 12 months. The company is partially cushioned against oil price falls as 1.2 million barrels are hedged at $US72 for the next two years.