Friday, October 15, 2010

Marketwatch: OceanaGold Corp Ltd

OceanaGold Corp Ltd [OGC.NZX] (also listed on the ASX under OGC.ASX )is a stock that has had an upwards ride with the gold price over the last two years and at $5.05 per share as of close of trade yesterday is trading less than 10% off its 52 week high of $5.41.

It had a good result in its most recently reported quarter but as a highly cyclical company pegged to the gold price investors must be aware that buying the stock at these levels is highly risky given that you would be buying near the peak of the cycle - in my opinion gold is either at or near its peak and one doesn't have to be that bright to figure out that the fortunes and therefore shareprice of this company is going to be negatively affected when the gold price inevitably heads south.

It has recently raised an additional $115.5 million in cash for business activities so cant fund expansion through cashflow or retained earnings and its net return per ounce of gold has reduced due to higher extraction costs. The company hopes to increase profit on the last quarter through a higher gold price.

It might be wise to extract oneself while the share price remains high.

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  1. HA HA HA Darren. You say gold is at or near its peak. I say It is just getting started.

    Buffet and Munger will eat their own feet on this one.

  2. At best for gold investors there is more downside than upside.

  3. Looks like in the short term I was right SB.


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