Half Yearly Report

RNS Number : 4208P

Golden Prospect Precious Metals Ltd

01 October 2013

 



GOLDEN PROSPECT PRECIOUS METALS LIMITED

("Golden Prospect" "GPPM" or "the Company")

Interim Report and Financial Statements for the six month period ended 30 June 2013

Golden Prospect Precious Metals Limited today announces its interim results for the six month period ended 30 June 2013.

The Company's objective is to provide investors with capital growth, from a portfolio of companies involved in the precious metals sector.  The Interim Report will shortly be circulated to shareholders and will also be available on the investment manager's website at www.ncim.co.uk

If you would like to receive the monthly factsheet on Golden Prospect Precious Metals Limited or any of the other New City Investment Managers' trusts please email [e-mail]

For the full set of results please view the attached PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/4208P_-2013-10-1.pdf 

Enquiries:

Legis Fund Services Limited

Patrick Farncombe

Tel: [phone]

Newgate Threadneedle

Roddy Watt

Tel: [phone]

Chairman's Statement                                                                                                                      

Dear Shareholder                                                                                                                                                                

It has proved a torrid time for late stage gold and silver investors in the year under review. However as I outlined in my statement at the interim stage "once the weak holders and short speculators have been fully shaken out, the argument for a renewed upward trend are more solidly in place than ever". This statement was largely based on our view that almost all of the fundamentally bullish factors remained firmly in play.                                                                                                                                                                  

Gold and silver shares have mirrored the situation well as investors will testify. From the depths of despair when prices reached rock bottom and were technically oversold there has been a significant shift in sentiment that has driven share prices of the majors and quality mid-tier producers into much healthier territory.                                                                                                                                                                          

Gold bullion has rallied, while silver has done even better climbing off its bottom. A myriad of technical, delivery, contango, hedging, backwardations and a host of other derivatives comments makes it difficult to fully digest and comment on every aspect of what is going on in this industry. Our Investment Manager's report herein provides more statistical information in this respect. However, whilst all the positive arguments for gold should remain intact going forward, prices will continue to be directed by news events surrounding the current geopolitical turmoil, QE tapering by the Fed and the Eurozone debt crises.                                                                                                                                                                                                                                                                                                             

Most of the substantial liquidation process, notably by the larger ETF's and other profit takers, has been absorbed by Central bank buying, mainly by China, Russia and India (although the latter has been curtailed by the frequent import duty increases by the Indian Government battling with their deteriorating economy.)                                                                                                                                                                                                                                                    

Gold's safe haven status has traction once more and a sustained rally is well underway. A further easing of the US dollar and signs of interest rates finally hardening in the continued economic climate will further play into gold favour. Tighter monetary policies in the US and Europe will keep global gold investors keen. Currency volatility will be extremely difficult to navigate in the fourth quarter when net long positions could well expand to hitherto levels.                                                                                                                                                                                                              

Before 2013 is over we would expect the gold price to test the previous significant level at $1525 at which there was a battle royal fought but lost earlier this year. This in our view should lead to a renewed accumulation of gold equities as producer margins re-enter more comfortable zones. By this time next year the $2000 mark seems more than likely.                                                                                                                                                                                                                                                        

The huge fallout that shook the entire industry earlier in the year will have produced an inquest over management competence and shareholder value as better cash control and dividend payments will be demanded by investors this time round. There will still be pitfalls to trap the unwary in the shape of a paper tsunami out of the bond market, the damage control that this would lead to from the spike in Treasury yields plus the big waves in global sentiment that China periodically creates from its growing pains.                                                                                                                                                                              

Gold will always be an emotional subject with many bankers and investors. But without any counterparty risk that other financial instruments carry, it still remains the best insurance policy around today. And when serious inflation inevitably kicks in once more the final stage of gold's long term bull market should see gold and silver shares outperforming all other forms of investment and asset classes in quite a spectacular way.                                                                                                                                                                              

Malcolm Burne                                                                                                                                                                   

Chairman                                                                                                                                                                             

Investment Managers Report

The first six months of 2013 were not kind to the gold price, which fell 26%, and were particularly harsh on gold mining equities which fared much worse. The XAU Index fell 45% and the GDXJ, the junior miners, 53%. We are firmly of the belief that this was a mid-term retracement in a long-term bull market and that the case for owning precious metals as a store of value, an unencumbered currency or a hedge against inflation is undiminished.                                                                                                                                                                                  

The main driver of gold's weakness in the first half of the year was the liquidation of the ETF holdings which lost 22% of their tonnage, and 41% of their value, during the period under review. The pace of liquidation has been greatly reduced since the end of the second quarter, a week that saw year-to-date lows for gold, silver, platinum and all the major gold equity indices, and both gold and silver have already bounced strongly off their mid year lows, gold by 18% and silver by an impressive 32%.                                    

It would appear by the record movement of gold from London vaults to Switzerland (still the largest refiners of gold coins and bar) and onward to Asia, particularly Hong Kong, that the gold previously owned by New York hedge funds has ended up in the hands of Indian and Chinese buyers. Only time will tell if they are 'firmer' hands than the previous owners, but that may be the case. Certainly the Indian government's attempt to reduce its inhabitants' demand for gold by raising import duties has met with little success so far. The central banks of the developing world have also been consistent buyers over the period with Russia, Turkey, Korea, and Kazakhstan at the fore, buying 186 tonnes between them.                                                                                                                                                                                                 

So where does the first half falls leave the equities? Certainly, in the harsh light of $1300 gold and $19 silver, there is a stark contrast between those low cost, well-managed companies able to thrive at such prices and those whose projects are loss-making and whose deposits are un-economic. Our focus remains on those companies with proven management teams such as Regis Resources, Silver Wheaton and First Majestic who sit at the low end of the cost curve. The market's movements have given us an opportunity to use the gearing to upgrade the portfolio and to enter some high quality development and exploration projects which previously traded way above our valuation.                                                                                                                                                                                           

There are challenges ahead for the sector however, not least the need to aggressively manage costs which rose unchecked until last year. In this, the elevated price of oil is a hindrance to all.  One positive feature of this year is the World Gold Council's initiative to standardise an "all in sustaining cash cost" metric across the industry. We would welcome this and regard it as vital for the industry to regain investors trust by increasing clarity and transparency.                                                                                                                                                                 

We believe that we have seen the worst of the gold price this year, and that the fundamental reasons for owning precious metals are still valid. The Company continues to focus on the low cost producers, but the recent price falls offer opportunities amongst the developers and explorers at attractive valuations not recently witnessed. With prices and market sentiment both hitting a low at the end of the period under review, we believe that the balance of risk has at last been skewed to the investor.                                                                                                                                                              

Will Smith                                                                                                                                                           

New City Investment Managers                                                                                                                                                       

 

END

 

 

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