A Chance to Buy into China’s Gold Mining Boom Dirt Cheap
Jul 2nd, 2008 | By Dominic Frisby | Category: Gold MarketThree bits of news have come out lately, which tell a big story. Firstly, on June 19th, they announced that construction of the main 8.6 kilometre access road had begun and will take 90 days. Road construction is not something you undertake without good reason.
Then the following week it was announced that, after two years of detailed work, all the necessary environmental approvals and permits are in place. The next stage as development accelerates will be the remaining permitting and commencement of construction of the power lines. But the inference is clear: this is going to be a mine.
But it’s not just going to be a mine. On Monday came the announcement that Leyshon is looking to secure a listing in Hong Kong. This is a process that might take some time, but on the Hong Kong exchange there are currently only five listed gold miners and they trade on amazing ratings. As this story develops, you can expect the Chinese to become more and more involved in terms of investment and growth, just as they have with Jinshan.
Leyshon boss Paul Atherley, is an extremely level-headed and capable leader, who understands the need to keep promoting a story even in the barren second phase of the mining life cycle. He’s also savvy enough to deal with everyone from the most stubborn Chinese official to the trickiest employee to the smallest, but noisiest shareholder. The management team owns about 15% of the company, so is well incentivised to act in the best interests of shareholders. That’s just as well, because more funds are going to be needed as this moves this into production and shareholders won’t want to see too much dilution. I believe the strategy is to raise a portion of the money soon – Atherley will be in London this month, presumably to talk to fund managers – and the rest at a higher price early next year, ideally after a Hong Kong listing and a higher rating is achieved.
The stock closed at 22p yesterday. If you believe in gold, in China and in the above life-cycle of mining companies, this represents a very low-risk entry price into a company which I believe could soon grow to be a major player in the Asian gold mining industry.
Source: A Chance to Buy into China’s Gold Mining Boom Dirt Cheap
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Dominic Frisby is MoneyWeek’s commentator on commodities, and is an active private investor in junior mining and energy companies. He is the presenter and producer of Commodity Watch Radio - an internet radio show run in association with Minesite, where Dominic discusses the commodities and financial markets with leading lights of the sector.