re: Ann: Commercial Production Commences at N... HotfireI do not...

re: Ann: Commercial Production Commences at N... Hotfire

I do not think that they would close the hedge when the share price is under 90 cents. At least that is my understanding after talking to them. They want a higher price, at least $1 I think. To achieve $1 plus ADU needs to find a lot more oxide gold, which is one reason they have taken up large tenements in Liberia.

My concern with ADU, and all goldies, is that they are being repriced down in the light of several factors, such as:

1. The premium from the Kinross takeover of Red Back Mining that flowed through to other west African goldies is being lost in the light of the subsequent fall in the price of Kinross shares;

2. Some increased risk aversion as QE2 ends - investors are stepping back to see what happens

3. Gold in AUD terms has done nothing for 12 months (still around $1400/ounce)

4. Construction and production costs are rising, especially due to the rise in oil prices.

5. Perceived higher risk in Africa after a series of disturbances.

6. Sell in May and go away syndrome affecting all small cap companies.

7. USD POG tends to go into its seasonal low in May.

8. Fear of monetary tightening in China and India to contain speculation/inflation which could impact negatively on investment demand for gold.

etc

I have concerns about the direction of the sharemarket in the US and Australia. I keep hearing that the markets in the developing world are over-priced. The risk is to the downside for the next few months according to my gut-o-meter. I have no TA skills and rely on finding good companies with an upward trend to make money. It is getting a lot harder to find clear bargains, and some of my "bargains" have proved to be not so hot, so I have cashed up a lot until I can see a clearer view of the direction.

If I were offered 75 cents for my ADU shares then I would sell, because I feel that I could get them back cheaper later this year. On the other hand, if they stay too low then perhaps a predator will buy in and keep the price up and I will miss out on any takeover action.

Where is the bottom for ADU? No idea. I do not mind if ADU falls a fair bit so long as they are actually operating profitably because I think they will recover and I can get some cheap trading shares.

ADU got a very short mention in yesterday's AFR in relation to their production and costs (basically stated what the press release said) and this may be the reason why ADU's shares did well today.

loki (always be prepared to change your mind on any "investment" at the drop of a hat)