David Fuller's view Lihir Gold (LGL AU) (weekly & daily) represents one of my happier forays in the turbulent world of gold shares. However all the credit goes to Iain Little of P&C Global Wealth Managers SA in Switzerland, who is no stranger to veteran subscribers. My route to Lihir began with Ballarat Goldfields NL, which Iain drew to my attention in yearend 2003. I bought Ballarat for my personal long-term portfolio on 9th January 2004, paying A$0.19. I sold just over half of my Ballarat on 22nd June 2005 at A$0.36. Lihir Gold entered the scene with its takeover bid for Ballarat on 17th October 2006. This was described as a "disastrous investment" by Mineweb, but fortunately Lihir's price was boosted by a takeover bid from Newcrest on 1st April 2010, which was initially spurned. I do not know how this will play out but in the absence of another bidder, I would not be surprised if Lihir was taken over at a slightly increased bid.


The share price of Lihir remains very steady, not surprisingly, as does gold bullion. However, I generally prefer bullion to gold shares and having long maintained that one should buy the volatile mines on weakness and sell them on strength, something I have failed to do on occasion, to my cost. I placed a limit order to sell Lihir at A$4.05 before going on holiday two weeks ago and this order was filled today.

In anticipation of reducing my overweight position in gold shares, I have been pondering for a while what I should then do with the cash. The investment environment is unsettling but this also contains a silver lining. The global stock market correction is increasing the number of opportunities available in Fullermoney themes.

My current intention is to reinvest the Lihir sale proceeds in the resources sector where valuations are improving. However I will not buy more gold shares at this time, despite bullion's relative performance and secular bull market. I like the industrial miners although they could become better bargains in this environment, especially as the Australian super profits tax proposal has temporarily cast a pall over the sector. Among other possibilities, currently, I do not have any exposure to fertiliser companies or the energy sector. Last but not least, I would like to have some exposure to the rare earths shares that Eoin has reviewed from time to time.

Despite my often stated reservations about paying up for commodities, I did just that today and reopened a long in gold, paying $1245 for a July contract, including spread-bet dealing costs of $0.60.