LGL - Lihir Gold

[Sean K]

Stock down over 20% since 14th July. Production report in line with expectation. Recent acquisitions bedded down. Hedge book closed. Resource upgrade in the wings. Gold still above $900/Oz. (Last time LGL traded at these levels gold was approx $630/Oz - US$ .79)

Any ideas why LGL is trading at these levels? Many analysts have it as a buy. (Macq/UBS just to name 2).

LGL has broken 2.74 support line. Where to from here?

Is it a screaming buy at these levels?

Yes, breaking $2.75 ish is bad darts. Concerning, and surprising, considering where it is, as you have outlined.

I can only assume that the market is factoring in gold to correct much further deep into the 800s. Gold stocks usually move ahead of POG for some reason (read that somewhere - to be corrected).

A screeming buy? It's hard to have any confidence in anything right now. I topped up some NCM this week, but wonder whether it was the right time. Considering your points, and that longer term POG is generally considered to be breaking all time highs again, you would have to consider this a good opportunity. (can't say buy, or you get your wrist slapped )

Seasonally, gold supposed to run up in the second half of the year. Fingers crossed.

 

[Bolivia]

What is also disturbing about the fall yesterday was the volume - 58mill shares. Was this some form of capitulation or does it smell of a Fundie selling out?

I hate to catch falling knives but at around 2.62, this stock really represents value IMO.

Might just have to go and cut my fingers!

 

[VViCKiD]

Seems like the buy orders are on the increase... hopefully we can find some fom of support around the $2.60 mark... it's astounding that LGL has reached these lows. Does anyone have a price target from brokers on this one ?

 

[Sean K]

Might just have to go and cut my fingers!

I'm with you Bolivia.

Seems like the buy orders are on the increase... hopefully we can find some fom of support around the $2.60 mark... it's astounding that LGL has reached these lows. Does anyone have a price target from brokers on this one ?

I just google these sorts of questions and you get all types of information.

This was at the top of the list.

http://www.maximiseyourwealth.com.au/pdf/LGL.pdf

Target $3.93.

(I assume 1 yr target)

$3.97 on this one:

https://www.investsmart.com.au/company_profile/summary/default.asp?SecurityID=LGL&ExchangeID=ASX

 

[VViCKiD]

thanks kennas... the break of $2.70 has gotten me spooked... Not really sure what to do here ... any ideas of where next support is ?

 

[Mofra]

thanks kennas... the break of $2.70 has gotten me spooked... Not really sure what to do here ... any ideas of where next support is ?

October 2006 support at/above $2.40 is a realistic possibility, this seems to be a very strong support level and I'd be fairly happy to see a drop here as an opportunity.

 

[Uncle Festivus]

BGF equities has a JORC Reserve valuation of over $5 per share for LGL - undervalued/fair value/oversold? Not sure why gold stocks are lumped in with the rest of the market? Lack of fundamental focus, negative sentiment contagion?

 

[Sean K]

thanks kennas... the break of $2.70 has gotten me spooked... Not really sure what to do here ... any ideas of where next support is ?

Should be support around here, and then in that next zone between $2.00 and $2.50. Also the 200d ma should be support.

Looks about oversold on RSI and stochs.

Still intra day at the moment, so we could see a rebound as people take advantage of the weakness.

If you think gold is going up long term, this is a bump.

Having said that, whose to know what's hiding in the wood pile.

 

[Bolivia]

Definately looks like a fundie getting out to me. Either that or someone is having a big short bet.

Either way LGL is now trading on a 2009 PE of approx 10x.

Try finding a better gold stock on value with production growth to match.

I hear the reverse beep beep of a truck!

 

[Sean K]

At the moment, this chart does look pretty bearish considering the dramatic drop while gold has stayed at prices that will allow a non hedged producer to lap up massive profits in the coming months. It looks like a significant drop in gold is factored in to the sp right now.

The negatives for LGL in my opinion are:

Ongoing uncertainty over the Ballarat operation reaching forecast production targets due to regional disasters. (PSV and BDG)

The EQI acquisition at premuim at a peak in a general equities cycle. May have paid too much for just 'potential'.

EQI key growth asset is yet to be on line. (forgotten name - too many rums)Like all developments will probably come in late and not produce the forecast ounces.

Lihir Island is a bloody volcano and sitting in the rim of fire and at any moment an earthquake could send them to the bottom of the ocean.

Positives:

Gold bulls are saying that POG is going $1000 plus by end of year and being unhedged will be a massive boost for the sp.

Great exploration potential with the EQI purchace and they could discover more massive reserves.

With the sp weakness a major MUST be looking at them as an add on, especially NCM which is now cashed up, unhedged, and needs to escape from the Telfer hitch perception. FFS, Cadia is bigger!!

If the gold bulls are correct, then current sp, and probably more weakness, is an awesome opportunity.

Must say again, that general market implosion will destroy all before it, much like the Arc....


On a brightish note, that hammer looks like a positive sign but needs confirmation with some positive price action to confirm reversal.

 

[VViCKiD]

With the RBA speculated to be lowering interest rates, shouldn't this be a good sign for the short-term price of LGL ?

 

[Bolivia]

Data on Share sales from 31st July - The day 58 Mill shares traded, show that Merrill Lynch were the largest net seller of 38 Million shares. Given that they are on the register as owning 11.02% of the Co. This is starting to make sense. ML are raising capital!

They were also the largest net seller on the 30th July and have probably been active in the last few days as well.

Merrill Lynch and Co. own 240Mill shares so they would have a few to go.

The good news, if this is indeed what is happening, is that at least it's not a hedge fund doing a short number.

Not sure where that places LGL as far as when to buy, but it would help to explain why it has been oversold.

 

[VViCKiD]

that would explain a bit.... man has this one copped a raping !!! hopefully it has reached support... looks like it... but hasn't started crossing over MA yet !! what an insane day for the resources ! selling hasn't stopped yet either..

 

[hobi1]

Data on Share sales from 31st July - The day 58 Mill shares traded, show that Merrill Lynch were the largest net seller of 38 Million shares. Given that they are on the register as owning 11.02% of the Co. This is starting to make sense. ML are raising capital!

They were also the largest net seller on the 30th July and have probably been active in the last few days as well.

Merrill Lynch and Co. own 240Mill shares so they would have a few to go.

The good news, if this is indeed what is happening, is that at least it's not a hedge fund doing a short number.

Not sure where that places LGL as far as when to buy, but it would help to explain why it has been oversold.

Hi Bolivia,

It may well be possible that Merill is the custodian, and not the holder of these shares. Does it actually say ML & Co. owns these share?

 

[johenmo]

I have looked at this one for a while. Whilst I don't have the expertise a lot of you have re charts and data, I do know expats on Lihir Island are pretty nervous about the government. And all I'll say is if you know the people/government well, you have just cause.

I heard today from a mate on Lihir - not working for LGL but a support company - that the mine is no longer using thermal power (locals said forget it) and have gone back to fuel, costing a fair bit. He was looking to buy but is standing back waiting to see how it goes re the political situation. Sounds like it's getting more and more unstable as each week/month goes past.

Incidentally, someone's considering building a resort Lihir Island - for when the mine runs out.

 

[So_Cynical]

I heard today from a mate on Lihir - not working for LGL but a support company - that the mine is no longer using thermal power (locals said forget it) and have gone back to fuel, costing a fair bit. He was looking to buy but is standing back waiting to see how it goes re the political situation. Sounds like it's getting more and more unstable as each week/month goes past.

Incidentally, someone's considering building a resort Lihir Island - for when the mine runs out.

HUH ...not using thermal power...the plant that LGL installed and payed for?

political situation...what political situation? the locals are share holders.

No mine = no money.....resort yer right.

Your shorting LGL ?

 

[Uncle Festivus]

I have looked at this one for a while. Whilst I don't have the expertise a lot of you have re charts and data, I do know expats on Lihir Island are pretty nervous about the government. And all I'll say is if you know the people/government well, you have just cause.

I heard today from a mate on Lihir - not working for LGL but a support company - that the mine is no longer using thermal power (locals said forget it) and have gone back to fuel, costing a fair bit. He was looking to buy but is standing back waiting to see how it goes re the political situation. Sounds like it's getting more and more unstable as each week/month goes past.

Incidentally, someone's considering building a resort Lihir Island - for when the mine runs out.

Nice downramp, but wrong!

The company has told me personally -

We currently have 56 Megawatts of geothermal capacity at the Lihir
Island gold operation. This equates to around 75% of our current power
needs at the site. The remainder is generated from Heavy Fuel Oil power.
Further expansions of the geothermal power plant are planned in the
future due to the significant economic and environmental benefits that
are derived from this inexpensive and green power source.

 

[VViCKiD]

Well it looks like LGL has fallen through a minor line of support.. next stop ~$1.80 ? what do you guys think ?

 

[So_Cynical]

I got some more @ today's low (2.10) so im still keen...long term.

Costs have risen significantly this year....if POG falls/stays below 800 for
a sustained period, alot of projects in development will be put on hold or
slowed down, and a few small producers will fall over.

 

[explod]

Had the price of gold stayed at around $US1,000 from the high in March, this stock with the production reports since would by now have found its way to $5 IMHO. I brought back in on Monday (bit premature in hindsight) but think it is one of the great bargains for the longer term.

I had written off the negative post but great of you to contact the company Uncle.