Lihir Gold (LGL) Shares

Submitted by Craig Strzelecki on 6 July, 2007 - 20:33

Lihir Gold (LGL) is the preferred stock among Australia's gold producers by Australian shares analyst Macquarie Research Equities. From the analysts' numbers, a 10% increase in the gold price will result in a 19% earnings upside for LGL due to its unhedged gold book. Overnight, in a move seen as bullish for the price of gold, Newmont Mining Corp (NEM) said it eliminated its 1.85 million-ounce gold hedge position. Market watchers have said that Newmont's decision to eliminate hedging was "crucial" to the gold market, and a real "vote of confidence" for the outlook for the gold market. Recently, the analysts have increased their gold price target to $720/oz in 2008, some 10% upside to where gold is at present. Recently, the analysts outlined why they've upped their gold price to $720/oz in 2008 (peaking in 4Q08 at US$745/oz). In their view, there are five key reasons to be buying gold today:

1) A muted supplyof gold response to higher prices
2) Lower-than-expected central bank sales of gold
3) Speculators' aversion to aggressively shorting gold in a post 9/11 world
4) Continued producer dehedging (just like what we've seen from Newmont) , and
5) Likely continued pressure on the USD

Lihir Gold (LGL) is Macquarie's preferred gold exposure, presenting investors with an "ungeared, unhedged gold investment vehicle". Analysts prefer Lihir Gold (LGL) over Newcrest Mining (NCM) because of Lihir Gold's:

1) Increasing production growth profile, and now completely unhedged to future gold price movements after recently buying back its hedge book
2) Lihir Gold is now in the top cost-quartile for gold extraction globally (geothermal power initiatives have helped to achieve this)
3) A bullish outlook for gold.
4) Better leverage to gold price movements versus Newcrest (NCM) - for a 10% increase in the gold price, Lihir and Newcrest deliver 19% and 5% earnings upside respectively.
Given their positive outlook for gold, and given the relatively stronger run of some of its base metals peers, they believe the gold sector is positioned to outperform with a 12-month outlook relative to the broader market. Read a previous recommendation for Lihir Gold.

Lihir Gold Limited is listed on the Australian Stock Exchange (ASX) under stock code LGL. You can view their investor website here. Ross Garnaut is the Chairman of Lihir Gold and the CEO is Arthur Hood. LGL was listed on the ASX on 9 October, 1995. Lihir Gold is involved in mining and production of Gold on Lihir Island in Papua New Guinea (PNG). The company had a code change on the ASX from LHG to LGL which took effect on June 4 2007. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade LGL. Check your charts and good luck with your share trading!