Sector Articles
As well as taking a note of what the directors in the companies you back are being paid, reports Vikki Kunz, you should keep a close eye on the share options they are offered.
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Canadian mining group Placer Dome's £860 million bid for Australian gold producer Auiron Gold has stimulated interest in substantial bid targets in a fast-concentrating industry and the possibility of a counter bid for Auiron Gold (recently quoted at 173.235p). Another Aussie, Perilya, has almost doubled to 34p since our December recommendation, and some profit-taking is in order. Durban Rooderpoort Deep has risen from 218.74p when we highlighted it in March to 342.5p, and may slow down. Another Aussie, Perseverance, is up 30 per cent, at the equivalent of 6.75p, since last week. Lonmin (LMI) and Aquarius Platinum (AQP) meanwhile look firm.
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Saddam Hussein's embargo on Iraqi oil exports has once more diverted attention from mining shares, while gold has dipped below $300 despite the air of crisis. Firestone Diamonds has put on 7p to 94.5p since our mention last week, and Palmaris soared to 5.5p to 9.25p before profit-taking sent it back to 7p. The majors have mostly been quiet.
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Prospects of US government deficits swollen by defence spending hikes and the re-emergence of gold fans have helped push the yellow metal up $10 in a week to $289 an ounce, and fed a surge in gold shares in Johannesburg to record levels in rand terms. Anglo American at around £11.50, Anglogold at £29.25, and Goldfields at 100.75p, are close to or at 12-month highs in sterling terms too, and Harmony has hit a new high of 585.75p since our last mention.
Some profit taking might be prudent, although there is a sense of momentum building. Meanwhile, there are other fish in the sea.
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Gold has failed to break back up through $280 an ounce and hold it, but some of the gloom has lightened elsewhere. Rio, advocated here last week, has edged higher to £11.58 and copper play Antofagasta has inched 24p to 450p.
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With gold easier again and copper continuing to plumb new depths, shares in major mining groups, such as Rio Tinto, Antofagasta and Lonmin, are drifting again, though Ashanti is up 4p at 231p since our mention last week. There are more signs of life from some of the tiddlers, such as Hereward Ventures, but a few new issues are having problems.
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Metal prices are now so depressed, adjusted for inflation, that they should already be discounting a future slump and soon be ready to anticipate an eventual cyclical upturn. That is the bullish view of copper at a 90 year low, zinc and lead at 40 year lows and gold and silver at 30 year lows, in real terms – though stocks of some continue high. Mining shares are mostly fluctuating on a sideways trend, but special situations, real and rumoured, abound.
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Gold has continued to hold up well – so far – at around $292 an ounce in the current atmosphere of crisis, in the face of heavy selling by some central banks, but the same cannot be said for shares. Angus & Ross has spurted 40 per cent to 20.5p after last week's mention, but majors, such as Rio and Lonmin, are down. Individual deals are what the market wants just now.
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Metal prices have stagnated of late, with platinum well below its peaks, gold still short of the chartists' $277 an ounce target and copper futures said to be heading south. Rio Tinto at £12.19 has eased marginally, but remains a hold, as do Antofagasta, off 5p at 510p, and Lonmin at 887.5p.
For now, the show is being stolen by Australian companies or companies with Australian links, such as Aquarius, Dwka, CBH and Perilya.
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The Bank Holiday brought a brighter shine to many mining shares as advisers plan a series of moves. Aim-listed Brancote has gained 5p since our mention to 152.5p and Gold Mines of Sardinia has edged forward to 17.25p, both worth holding.
Among the major mining groups, Rio Tinto has bounced up to £12.33 and retains its long-term merits. So does copper play Antofagasta, on the upswing again at 515p, ahead of interim results.
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Simon Brickles, the London Stock Exchange's head of Aim, believes that his charge has now achieved 'critical mass' and has evolved into a market that is 'considered interesting' by the investment community. With three of this month's eleven new entrants raising £37 million between them, his views appear well-founded.
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With summer stock markets resistant to new ploys, only a few miners are showing short-term gains. They include Ashanti, up 10 per cent since our comment last week to 257.25p, and Lonmin, up 10p to 999p. Many others are off again, such as Antofagasta at 450.5p, despite long-term appeal.
Undeterred, ex-cricketer Phil Edmonds is raising up to £1.5 million on Ofex for Central African Mining and Exploration. This is a tantalum play focused on Namibia, Zimbabwe and Mozambique.
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Many mining shares have been drifting or falling lately, against a background of lacklustre metal prices, including gold, though some, such as Rio Tinto at £12.31, Antofagasta at 467.5p or Lonmin at 989p, remain sound long-term holdings. SG has had to pull its Chapada Diamonds Aim float. David Williamson's Oxus Mining new issue has quickly fallen 27 per cent to 21.75p, pending a project report for banks. But elsewhere, there are pockets of light.
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