Managed Accounts Share Trading Investment Notification - Purchase Of Lgl

Good afternoon,

For our first share trading investment of 2010, we re-purchased Lihir Gold (LGL) shares for the MDAs at $3.045 on Friday afternoon for just over 15% of the portfolio. Our previous transaction in these shares (a purchase at $3.03 and sale at $3.42 last quarter) was initiated when gold was trading at $995 per ounce; it is now at $1,093 as I write this. With the stock purchased at a similar purchase price, it represents even better value than last quarter.

Coincidentally, LGL also reported fourth quarter production figures on Friday, which confirmed record production of 1.12M ounces of gold for the full year at a cost price of just US$397/ounce. The forecast production for 2010 is around $1.02M ounces however rising to as much as $1.3M ounces in 2012 with cash costs of $440/ounce. At those prices, and using spot gold as a benchmark, the company will produce free cash flows of $726M against a market capitalization of $7.2B making LGL one of the cheapest gold producers we can buy.

On a technical basis, the share price has been trading a wide range with an upward overall bias for a long time now. With production, power generation and funding in place and with no hedging against the gold price, LGL is as safe an investment in the gold sector as we can make. Buying weakness and selling into strength would historically have made solid profits and we expect, with a continuing strong gold price, to be able to do the same in this situation again.

If you would like to speak with me about anything at all, please call the desk,

by: Hayden Kerr

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