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To: H James Morris who wrote (125415)	5/22/2001 3:47:17 PM
From: craig crawford	Read Replies (1) \| Respond to of 164684

I think these analysts are just plain wrong. I personally like HM better than NEM. ~~~~~~ Tuesday May 22 3:19 PM ET Analysts: Gold Rise May Not Hold By David Howard Sinkman NEW YORK (Reuters) - Investors considering a jump into gold mining shares after the yellow metal ran to 15-month highs on Monday should probably think again. Not only do many question whether the gains will hold but some producers will not benefit from the rise because they've already locked in sales at lower prices, U.S. analysts said. ``These stocks need a higher gold price to justify their valuations,'' said Credit Suisse First Boston analyst Robert Doyle. ``It's safe to say gold equities have already anticipated the rise in bullion,'' he added. Gold is already showing signs of losing its recently renewed luster. On Tuesday, COMEX gold closed marginally lower at $285.50 but was well off Monday's peak above $297. However, prices are still some 12 percent higher than the 18-month lows notched in February. Analysts said investors who want to play gold swings via the equities market need to be very selective. A company that has not locked in heavy forward sales, and would thus be best able to take advantage of rising spot gold prices, is the most attractive. Locking in forward sales at a set price, or hedging, cushions the impact on producers of falling gold prices, but means the company may not enjoy the full benefit of a rise in the underlying price of bullion. The winners in a sustained rally will be companies like Newmont Mining Corp. (NYSE:NEM - news) and Homestake Mining Co. (NYSE:HM - news), which are not heavily hedged. Barrick Gold Corp. (Toronto:ABX.TO - news) and Placer Dome Inc. (Toronto:PDG.TO - news) have heavier hedged positions. Hedging protects companies when gold prices fall, but can be devastating when prices rise. Ghanaian gold miner Ashanti Goldfields Co Ltd. (AGC.GH) was brought to its knees in 1999 when gold prices spiked because it was heavily hedged. The company had sold forward several years of production through derivative deals and other strategies and was forced to honor certain obligations by buying gold in a skyrocketing market. Riding inflation fears, the FTSE Gold Mines index (FTGM), which includes firms from Australia, South Africa, the United States, and Canada, is up about a third so far this year. The current uptrend has also been helped by investors who scrambled in the past week to buy back short positions at higher prices than where they had borrowed then sold gold. LOST LUSTER This rally, like several speculative rallies in the past few years, does not have the legs to last, say analysts. Gold has weak-long term fundamentals, from sluggish jewelry demand to an ever present overcapacity threat. Central bankers remain large net sellers of gold. After recent highs, investors are being tempted to take profits, putting the brakes on any long-term rally. Analysts are waiting to see if there is any follow-through but are not holding their breath. ``There is a good chance this rally will stagger,'' said HSBC Securities analyst Victor Flores. ``If the rally does not last, you will see profit taking.'' THE WINNERS Looking at a rise in gold from $265 an ounce to $285 an ounce, Newmont's net asset value rise was five times greater than Placer's because of the absence of hedging, said Doyle. ``Without question, Newmont and Homestake have greater leverage to take advantage of a change in gold position,'' said Doyle. However, Newmont and Homestake shares are already expensive and offer little upside. Lehman Brothers analyst Peter Ward has a sell rating on both companies. If this rally does not have legs, companies with heavier hedged positions, like Barrick and Placer Dome, become more attractive. CSFB's Doyle has a buy rating on Barrick and Placer Dome, and a hold rating on both Newmont and Homestake. Unsure about the strength of the rally, HSBC's Flores said Placer Dome is the most attractive of the major gold companies because it has the cheapest valuation.