Investors shy away from gold shares

January 29, 2009

Commodity Online
MUMBAI: Are investors having indigestion problems as far as gold shares are concerned? It seems so. After gobbling up as many gold shares as they can, investors are now feeling some problems in putting their money in gold mining companies.

This was evident this week when some mining companies tried to raise funds from the market. Newmont Mining this week unveiled plans to raise $1.2-billion to finance an acquisition but it did not get good response. Same was the case with two smaller financings from Canadian gold, which struggled to find buyers.

Now there are several companies ready to sell stocks when gold is at $900 per ounce. Barrick Gold is one such company. The list also includes Osisko Mining and Lihir Gold and stalwart Franco-Nevada.

The overall health of this sector is excellent. After being all but paralyzed by the credit crunch, Newmont is showing that mining companies are able to do sizeable transactions, backed by banks.

Newmont is taking control of an Australian mine previously shared with AngloGold Ashanti.

However, the prospect of all this equity coming to market will slow financings.

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