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Merrill lynch to launch new gold fund { November 9 2004 } Original Source Link: (May no longer be active)
http://www.theage.com.au/news/Breaking-News/Merrill-Lynch-to-launch-new-gold-fund/2004/11/09/1099781378186.html?oneclick=truehttp://www.theage.com.au/news/Breaking-News/Merrill-Lynch-to-launch-new-gold-fund/2004/11/09/1099781378186.html?oneclick=true
Merrill Lynch to launch new gold fund
November 9, 2004 - 4:14PM
The shrinking number of locally listed miners had left Australian investors with few opportunities to cash in on a booming commodities market, a London-based fund manager has said.
Unlike in previous commodity cycles, the management of the mining industry seems determined to ensure that shareholders are well rewarded, Evy Hambro, lead fund manager for the Merrill Lynch International Investment Fund World Mining Fund, said.
He expected the major mining companies to break their record first half 2004 earnings in the final six months of the year, but said the ability of Australian investors to gain exposure to the global resources market had been significantly eroded over the past two decades.
"Consolidation in the mining industry, whether it's gold, copper, coal - you name it - there's far less choice today for people to invest in the mining sector in Australia than there has been for many years," Mr Hambro, in Australia to promote the upcoming launch of an international gold fund, told AAP.
"If you look at the big gold companies that are listed here you start with Newcrest Mining Ltd and you almost finish with Lihir Gold Ltd."
Fundamentals driving the gold price, which is hovering around a 16-year high at $US432 an ounce, were positive, Mr Hambro said.
"Demand seems to be fairly robust and supply seems to be on a declining profile, therefore we expect prices to be supported by the deficit that appears to be coming around fairly soon in the gold market," he said.
"Gold today is significantly undervalued if you compared it to say oil, or the purchasing power of the past.
"You only have to go back into the late 1970s or early 80s when gold was trading significantly higher - at a peak of $US850."
Geopolitical and economic uncertainty have also highlighted gold's status as a safe haven asset.
Despite the recent spate of mergers and acquisitions within the gold industry, Mr Hambro said the sector remained fragmented and expected the consolidation to continue.
"The world's biggest gold producer, whether you look at Newmont Mining or AngloGold Ashanti, produces roughly seven million ounces out of a market that's 10 times bigger than that, so the biggest producer doesn't even produce 10 per cent of the world supply," he said.
By comparison, just three companies control more than 80 per cent of the iron ore industry.
Merrill Lynch was bullish on most commodities, Mr Hambro said.
"We principally like the outlook for copper, nickel, platinum and nearly all the bulk commodities," he said.
"I don't know which one is going to have the most performance over one month, six months or 12 months but I think that we're set for some fairly exciting prices for them all."
The Merrill Lynch International Gold Fund will be managed from London and can be accessed by investors with a minimum of $25,000 to invest.
The fund would typically hold 30 to 60 primarily mining stocks in North America, South America, Australasia, Latin America, Africa. Russia and China.
It may also invest in other precious metal, base metal and related mining stocks.
© 2004 AAP
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