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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


Trans Siberian Gold.


Trans Siberian Gold. (TSG:LSE) 2005-10-09

The price of Gold is rising rapidly. Here is a down trodden gold share, that is highly speculative, but could give you an easy 100% return within a year!

Mines, Gold, - this is a recipe for extreme volatility. However; having said that, the shares of Trans Siberian Gold have been beaten down recently, when most Gold shares have been on a roll.
This company floated on AIM (Alternative Investment Market), in London, in November 2003. The latest figure of total mineral in their licenses is about 3.2m ounces, which is worth over $1.5 billion at current prices. This is an increase of 7% in volume over the figures quoted in the flotation prospectus, back  in November 2003. However, these are, of course, only estimates.

They are stupendous figures for a company capitalised currently at £38m.

Of course with mining or any business it is the profit that matters. Gold production costs vary with the quality of the ore and conditions etc. Gold mining is generally, a low margin business, so that it is only with the recent price rise of the metal that more mines have become economical.

The directors of Trans Siberian Gold say: Our gold resources after accounting for production costs are worth $25 a share and our present market value considerably understates that.

$25 is about £13-14 at current exchange rates, against a share price of 0.55p. On the face of it then an asset play of obese proportions.!

But this assumes that the gold price remains around its present value. Any fall will reduce or maybe wipe out this margin. But any rise in gold prices will make it even more attractive.
It is worth noting, that so far, Trans Siberian Gold has not sold one ounce of gold or anything else, apart from its shares on the stock market!
It is awash with cash but this has been raised for the exploration and development of its licensed mining areas. All just words so far.
The principal factor behind share price movements of mining companies is the price of the mineral they are mining;  in this case Gold.
Small companies especially are very vulnerable to this, carrying a large element of emotional gearing in their share price as a result.
Positive sentiment resulting from a fairly modest gold price rise can drive the share price up dramatically. And vice versa. Here is where our  interest is sparked, as we expect Gold to continue to rise in price for some time yet. The share price of Trans Siberian should broadly track the Gold price higher.

We make no bones about it , this is an ultra risky share. Estimated reserves can turn out to be, over optimistic, but even so, in this case we believe the further increase in the gold price, will push these shares back towards their high for the year of around 135.00p and in a relatively short period of time. This would give a very nice return on our money.

Buy Trans Siberian Gold (TSG:LSE) up to 75.00p

Be ready to sell out quickly, when the Gold price hike comes to an end.


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.