Friday, February 27, 2009



The local bourse ended flat yesterday with BSP traded at an average price of K0.98, as CGA declined 7 percent from previous; On the upside was OSH closing at K8.70. Overseas last night, IOC on AMEX finished stronger at US$18.54 while NBPO in London registered trades at GBP2.46.

The local market is expected to open flat today with bids for HIG at a high of K0.14 and sellers for CPL willing to sell their stocks at K2.50.

On the corporate front, Steamships Trading (SST), one of the oldest diversified trading companies in PNG recorded a K16m rise in its net profit to K90.2m.

Yesterday’s movers on the local bourse 26/02/09:
BSP: -1.02%
CGA: -7.14%
OSH: 5.45%

Monday, February 23, 2009

Lihir Gold Research

Record gold production and rising gold prices have enabled LGL to report a net after tax profit of $109.3 million for the year to December 2008. The Company reported its third successive year of record production, at 882,000 ounces, which was up 26% from 702,000 ounces in 2007. The increase was due to significantly higher output at the cornerstone Lihir Island operation in PNG, and because of the inclusion of production from the Bonikro mine in Ivory Coast and the Mt Rawdon mine in Queensland. These mines were acquired by LGL as part of its acquisition of Equigold NL in June 2008. Revenues increased by 52% to a record US$756 million, driven by a 23% increase in gold sales volume and a 29% rise in the gold price. For the full year 868,927 ounces of gold were sold at an average cash price of US$850 an ounce, up from US$666 an ounce in 2007.

Source: Lihir Gold Limited Website (23 February 2009)

Total cash costs were US$400 per ounce in 2008, which continues to position the company at the lower end of the global gold production cost curve. Unit costs trended lower over the course of 2008, with total cash costs reducing to $353 per ounce in the December quarter. Aggregate operating costs for the year totalled $463 million, up from $306 million in 2007, as a result of continuing cost pressures across the mining sector, higher oil prices for most of the year and because of higher throughput at Lihir Island.

LGL Managing Director Arthur Hood said the solid 2008 result reflected an outstanding performance from the cornerstone Lihir Island operation and the benefits of the merger with Equigold NL. "Going into 2009 LGL's financial position is very secure. We have healthy operating cashflows and widely diversified revenue and production sources. The company has a strong foundation to enable future investment in growth opportunities and to deliver maximum value for shareholders."

In 2009 group-wide gold production is forecast to increase by more than 10 percent to in excess of one million ounces. Falling oil prices and favourage exchange rate movements are expected to drive a reduction in total cash costs in 2009 to less than US$400 per ounce.

2009 Outlook

Total gold production is forecast to increase to another record of more than one million ounces. Production at Lihir is forecasted to be between 770,000 and 840,000 oz for the year. Bonikro is expected to contribute approximately 130,000 – 160,000 oz in its full year of production. Mt. Rawdon is expected to continue its reliable and consistent performance to deliver around 90,000 – 100,000 oz for the year. At Ballarat, production is forecast to be between 50,000 – 100,000 oz in 2009.

Falling oil prices and favourable exchange rate movements in the final quarter of 2008 are expected to have a beneficial impact on costs in the current year. Total cash costs for the group are expected to be less than $400 per ounce for the full year, excluding Ballarat.

If you want a copy of the research document send your request through to



On Friday, the local market ended relatively quiet with only a few trades going through for CPL at K2.50, while CCP closed unchanged at K2.43. In the overseas markets, LGL finished at AUD3.40 with a high of AUD3.52 while on the local market it closed with bids as high as K5.20. And NBO concluded the week at GBP2.52.

The market is expected to open flat today, with offers for OSH as low as K8.50 and BSP bids still steady at K0.98.


On the corporate front, LGL released its annual report announcing a 54 percent increase in their net earnings on the back of a strong gold price and an increase in the production output.

Last Friday’s movers on the bourse 23/02/09:
BSP: -1.01%
CPL: 0.80%

Friday, February 20, 2009

Highands Pacific Group Announcement

Highlands Pacific Limited (“the Company”) refers to its announcement of 17 December 2008 and the letter mailed to shareholders of unmarketable parcels on 19 December 2008.

The Company wishes to advise that the sale of 8,606,078 shares were sold off market today. The proceeds from the sale of these unmarketable parcels will be paid to shareholders with cheques anticipated to be mailed out today.

The process resulted in 4,444 shareholders being eliminated from the Company’s register and this will represent significant cost savings going forward.

Wednesday, February 18, 2009



Tuesday, the local bourse finished active with reasonable volumes changing hands. LGL gained some territory to end at K5.20 while CCP closed with a high selling pressure pushing down the price to K2.43 with CPL finishing steady at K2.48. IOC last night fell 9 percent to end at US$17.61 in the US.

Trading should pick up slowly as the day progresses, with BSP bidders at K0.98 and sellers for NBO selling at a low of K12.00.


In company news, IOC reported yesterday that they will be giving a presentation at the ENERCOM Oil & Services Conference in San Francisco. Also Kina Asset Management released its Net Tangible Asset (NTA( as 31st January 2009 is at K0.90.

Yesterday’s movers on the bourse 17/02/09:
BSP: 1.02%
CCP: -2.01%
CPL: -0.80%
LGL: 8.10%
MGO: -5.88%
NBO: 0.10%

Monday, February 16, 2009

POMSoX Weekly Update

Last week saw the local market closed steady with most of the listed stocks experiencing small changes in their share prices; BSP traded at an average price of K0.99 with reasonable volumes; and LGL on the local market reached a high of K5.00 while on the ASX it surged 5 percent on the back of a strong gold price to end the week at A$3.35.

Overseas, IOL concluded the week at US$19.63 with a high of US$20.00 on the AMEX while in London NBPO ended stronger at GBP2.63.

Company research: Rift Oil

Rift Oil Plc (Rift) is a UK-based company engaged in oil and gas exploration. The Company operates within the UK and Papua New Guinea.

BSP Capital has just released the latest research report on Rift. Email to receive a copy.

PNG Stock Update

The local market concluded the week flat, with only a small volume changing hands for BSP and NBO at K0.98 and K9.50 respectively. While in London saw NBPO closed at GBP2.63 as IOL rallied nearly 2 percent reaching a high of US$20.00.

This morning has offers for CGA as low as K0.96 and NBO buyers are lined up at K9.60.

New report released on Rift Oil today. Email to be sent a copy.

Friday, February 13, 2009



Trading was not as active yesterday with light volumes changing hands. LGL saw trades go through at K5.00 while the offers for NBO closed at K10.00. Last night in London had NBPO finished up 12 percent registering trades at GBP2.60, while IOC ended at US$19.00 in the US.

The market today will be off to a sluggish start but should settle stronger on the back of more positive news from the trading companies. With offers for CPL are at a low of K2.50 in the pre-open stages of the market.

Yesterday’s mover on POMSoX 12/02/09:

Wednesday, February 11, 2009

Gold Technical Analysis

Gold’s recent stall around the $900 level has locked the market into a range of around $890 to $920. Longer term technical signals remain bullish here, but some signs of the trend slowing down are starting to emerge. We’d remain bullish while market holds above recent range low $890, but consider reversing to bearish on a break below this level.

POMSoX Update


Tuesday, saw the market finished relatively quiet with only a few trades going through, BSP gained 1 percent to end at K1.00, and MGO ended unchanged at K0.17. In overseas, last night saw NBPO loosing a little to close at GBP2.45 while InterOil in the US fell 6 percent to US$18.10 reaching a high of US$21.00.

The opening phase of the market today has bids for BSP as high as K0.95 while NBO bidders are at K9.51 and KAM sellers at a low K1.17.


COY: CopperMoly Limited recently listed on the local market reported yesterday that the first two drills at Nakru-2 prospect have higher grade copper mineralization.

Monday, February 9, 2009

PNG Stock Update

The local bourse closed stronger with the listed companies ending the week with reasonable volumes. BSP advanced 1 percent to K0.99; as OSH closed the week at K8.00; while LGL on the local market had bids ending at K4.10. NBO in London finished steady at STG2.58

Today has offers for KAM as low as K1.17 while NBO has bids as high as K9.50.

In commodities, spot gold remains strong last hitting $US911.50, just a little down from highs. PNG receives a lot of revenue from commodities such as copper and oil, of which both have fallen drastically. The nation's gold reserves could help offset some of the losses.

BSP: 1.02%
OSH: 0.50%

Tuesday, February 3, 2009

Global markets, depressions and so on...

While global central banks acted relatively quickly to the credit crisis, we are only now getting data on just how badly it is affecting the global economy. The speed and size of falls in production have been surprising and forecasters, such as the IMF, are rapidly downgrading their forecasts for global growth. In October, the IMF thought there was a 60% chance of a recession. After several revisions, the IMF are now forecasting a deep downturn. World growth is expected to fall by 0.5% over 2009, the lowest rate since World War II. For advanced economies the fall is greater, with a 2% contraction expected over 2009.

In our view, one thing the past teaches us is that unless the financial sector is repaired, no amount of monetary or fiscal easing will bring about a lasting recovery. So we think it is encouraging to see further steps by Obama to quarantine toxic assets.

While Australia’s overall financial system is in better shape than many others, collapsing world trade means that both export volumes and prices will fall. The unwinding of the terms of trade boom and difficulty in accessing capital will likely lead to a sharp fall in business investment.

Expressions on Recessions and Depressions

So, what is the difference between a recession and a depression? The old joke states: "A recession is when your neighbour loses their job. A depression is when YOU lose your job". On a more serious note, whilst there is no agreed definition, a depression may be defined as a recession where real GDP falls by more than 10%. The last one in larger developed economies was the Great Depression of the 1930s, where unemployment in Australia got to 20%. Recovery from this was patchy, with another less severe depression during 1937-1938. Normal economic activity did not return until 1940-1941. Since then the US has not had anything close to a depression. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent.

Given the sober global outlook for 2009, a reasonable projection is that Australia will have a mild recession with the second half of 2009 starting to see positive growth returning. Year-on-year GDP growth for 2009 should be just positive (could possibly turn out to be slightly negative), with positive growth for 2010. Therefore, we are of the view that this is NOT a depression. Whilst we believe unemployment may hit 7% at its worst, with 93% of Australians still employed, this is not near depression levels.

The Logic of Staying the Course - Interest rates do count

It appears that investor psychology is divided amongst those who are resigned to staying the course, having lived through their portfolio falling, and those who are more prone to panic. Cashing in growth assets at this point in the cycle (arguably close to or at the bottom) is not sensible, if history is anything to go by.

Example: If your equity portfolio has lost 50%, and you decide to move your funds into cash, with interest rates at 3.25%, it would take nearly 30 years for your portfolio to recover and with no tax relief through imputation credits / capital gains tax discounts (of course interest rates are likely to rise at some stage in the future).
On the other hand, over the last nine bear markets in Australia it has taken between 15 months and just under eight years for portfolio values to be restored. On average around three and half years. Part of the reason this is the case is that once the sharemarket reaches a bear market or recession low, it typically bounces back reasonably dramatically in the first year (on average, 32% over the last nine bear markets).

Whilst investors may feel "damned if they do and damned if they don't" in this negative market, the logic is on the side of staying the course; particularly with interest rates so low (even five year Government Bonds offer little relief at around 3.2%).

Stop Reading the Paper! Six Good Reasons to be Cheerful:

  • The Australian economy is in better shape than most of the developed world.
  • Although it looks like Australia may have a mild recession, the economy should bounce back, as it always has done in the past.
  • Recessions represent an opportunity for investors to buy good assets at great prices looking forward to the next boom.
  • Sharemarkets typically bounce back well before the recession is over.
  • The sharemarket has always bounced back to new highs, although this may take some time.
  • Most Australians have long-term superannuation assets that will grow over the long-term and are not forced to sell at rock bottom prices.

Aussie Reserve Bank and Government Act

It is likely that today will be remembered as the day that the Australian economy got a massive policy jolt. On the fiscal policy side, the Government followed up on the October Economic Security Strategy, worth $10.4 billion, with today's announcement of its Nation Building and Jobs Plan, worth $42 billion over the next three and half years. The stimulus is broadly split between a $28.8 billion spend on infrastructure and a further $12.7 billion of one-off cash handouts to low and middle income households, starting from March - April this year.

The $28.8 billion spend on various infrastructure initiatives, given the longer lead times for these projects, will be spent from 2009 - 2010 onwards with $16 billion of the $28.8 billion projected to be spent during that period. The Treasury estimates that the total package will add around 0.5% to growth in 2008 - 2009 and 0.75% to 1% over 2009 - 2010.

On the monetary policy side, the Reserve Bank of Australia (RBA) today eased by 100 basis points, reducing the cash rate to 3.25%; the lowest level in the modern monetary policy era. The RBA said today, “the combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad”.

In the market, the $Aussie liked the move at first – probably just a little relief rally – then changed its mind. At around 63-64cents, the market is really not telling us too much.

The stock market chose to ignore the news, having a rather flat day.