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Gold/Mining/Energy : Medinah Mining Inc. (MDHM) -- Ignore unavailable to you. Want to Upgrade?

To: ZenFAUST who wrote (22457)	6/28/2000 6:55:00 PM
From: Handshake™	Respond to of 25548

worldlyinvestor.com Region of the Day Gold, But No Glitter in Peru By Luis de la Prida, Correspondent Buenaventura has an impressive portfolio of mining assets, but it's not delivering riches to investors. Compa¤ia de Minas Buenaventura (NYSE:BVN - news) pulls glittering metals from the ground, but its stock doesn't hold much luster these days. With stakes in Latin America's largest gold mine and an impressive exploration portfolio of its own, it would seem to have the Midas touch. But while it is the foremost precious metals mining company in Latin America, Buenaventura doesn't necessarily make for an appealing stock for every investor. ``Because of its low-cost production and its blue-chip status in Peru, Buenaventura has strong defensive qualities,'' says Merrill Lynch analyst Chris Albi. ``We recommend it as an attractive investment for long-term holders of Peruvian and gold equities and as a potential trading play on movements in the gold market.'' In the near term, however, Albi doesn't think that the company's impressive holdings offer sufficient upside potential to compensate for the weakness he expects to see in the gold market. The analyst rates Buenaventura an ``accumulate'' in both the intermediate and long-term. His price target of $20 on its American depositary receipts is nearly 17% higher than its current price of about $17 1/8. Golden Growth Buenaventura has been in the mining business since 1953. The company spent the first 25 years of its existence mining silver, but gold has carried the day since the 80s. Today, Buenaventura operates four mines in Peru and has controlling interests in four mining companies that own several mines throughout the country. And it is said to have a very impressive exploration portfolio. Its most important asset by far, however, is one that Buenaventura doesn't fully own. That asset, the Yanacocha gold mine is the largest such mine in Latin America, pumping out nearly two million ounces of gold per year. This figure dwarfs Buenaventura's next-biggest mine, which puts out just 70,000 ounces of gold per year, according to Merrill's Albi. Newmont Mining (NYSE:NEM - news), which owns 51.35% of Yanacocha, operates the mine. For its troubles, Newmont receives a management fee from Buenaventura, which has a 43.65% stake in the mine. The International Finance Corporation, a unit of the World Bank, owns the remaining 5% stake in Yanacocha. The mine benefits Buenaventura in two key ways. First, Yanacocha is a key source of growth. The mine is expected to increase its output to 2.5 million ounces by 2005, a 25% increase from current levels, which could make it the largest gold mine in the Americas. ``The mine has a good production profile,'' says ABN Amro analyst Marcelo Chan. ``Production should continue to increase over the coming years.'' Yanacocha is also one of the world's lowest-cost producers of gold; Merrill's Albi says that low-cost producers are those that have cash cost of less than $175 per ounce. Buenaventura's cash costs have been below $110 per ounce for nearly a decade and are expected to be in the $100 range over the next two to three years. ``They'll be making a lot of money no matter what happens,'' says Albi. Dull Future Despite these positive attributes, analysts see limited upside in Buenaventura's shares. The main reason: Buenaventura relies on gold for nearly all of its net income, but the future prospects of this commodity are far from stellar. Gold is generally seen as a safe haven in times of uncertainty. But despite higher oil prices and recent market volatility, most analysts expect gold prices to remain flat. Merrill Lynch, for one, expects prices to average $290 per ounce this year and $315 per ounce next year. Prices have mainly been pressured by fears that the world's central banks will continue to sell their gold reserves. Such pressures have eased considerably, as a result of recent selling caps put in place by Europe's central banks. But with nearly one third of the world's gold inventories residing in these banks' vaults, often earning little or no interest, you can bet that the market will continue to focus on this issue. ``The specter of continuing central bank sales, weak producer control, a strong US dollar and the apparent erosion of gold's economic and monetary qualities are all contributing to a weak market,'' says Merrill's Albi. ``Although we expect the worst of it is over, the recovery should be slow and spotty.'' Go to www.worldlyinvestor.com to see all of our latest stories.