REVIVED INTEREST IN SHARESDEVALUATION SLIPPER FITTED CINDERELLA GOLD INDUSTRY

Greymouth Evening Star, 26 September 1949, Page 5

REVIVED INTEREST IN SHARES—DEVALUATION SLIPPER FITTED CINDERELLA GOLD INDUSTRY

DUNEDIN, This Day (0.C.).— The impact of sterling devaluation and the almost simultaneous concerted actions of the Australian and New Zealand Governments in following suit had little real effect on Stock Exchange prices for local investment issues, but the fact that the spectre had materialised and could be measured, weighed, and analysed brought investors back into the market after a fortnight’s absence, and if their numbers still left much to be desii'ed, at least their voice was strong, writes “Gregory” in the Otago Daily Times. The devaluation slipper fitted the Cinderella gold industry to perfection and the Ugly Sisters (eight guineas and Socialist-squeeze) were frustrated in best story book fashion.

Gold at £l2 4s 6d an ounce is a payable proposition, and it must be kept in mind that to concerns which had payable wash or ore at the old price of £8 8s 6d the new price will represent additional profit of anything from 100 to 500 per cent, or more, according to the margin on which they previously made a success of their enterprise. The Theory Of It

If, for instance, a dredging proposition was paying an occasional dividend on a margin of 10 s: per ounce, the margin now will be £4 6s an ounce, and theoretically at any rate —gold propositions are almost invariably sold on theory—dividends should now be eight times larger or eight times more frequent. It is a far cry back to gold at £3 17s IOJd an ounce, the figure at which it opened up the hinterland of Otago and brought men on perilous sea journeys to face the perils of land in search of the bright metal. But in those days gold was where you stumbled over it, whereas today it is “where you find it,” and the finding is an expensive business that tests the ingenuity and perseverance of man, and in recent years has brought him trifling reward. Interest in local gold issues was confined to speculative nibbling during the week, with some outrageous margins as buyers and sellers played blind-man’s buff, as witness the quotations on Friday morning for Kaniere, with buyers at 13s and sellers asking 26s 6d. Genuine interest and serious reckoning were largely centred in Mount Morgan shares, however, which sprang from 9s to 12s 9d without an intermediate price, sagged to 12s on the northern markets, but came again on Friday with renewed strength. In Sydney their week-end-jump carried them from 9s 9d to 15s 9d, but this was followed by a reaction, apd on the opening day they were sold at nine prices varying from 14s 6d to 15s 9d.

Mount Morgan’s Position No gold producer to our knowledge “fluked” it better than Mount Morgan, which, due to pay its first dividend in seven years next week, is already working a much better grade ore and higher proportion of ore to overburden, and is in sight of even better material. Gold production in 1948 was 43,6290 z from 2,192,000 tons of material, and in 1949 some 59,0000 z from slightly less material. Estimating the current year’s production at a conservative 58,0000 z, the

company will, at the new Australian price for gold, net an additional £290,000 profit, or enough to pay an addition 2s in dividend over and above whatever could be forecast from the recently declared interim. There is “gold in that thar mountain,” and the 10-year development plan of systematic removal of the overburden is rapidly approaching fruition just when gold comes into its own. And if there are many who will point a derisive finger to the decade of disappointments of patience-test-ing Mount Morgan, at least they will agree that the gold they fretted for is still there and today is worth £l5 an ounce undug, whereas it might well have been unearthed, shipped and reburied at Fort Knox at £lO an ounce.

If we appear enthusiastic for the outlook for profitable gold producers, we would only pause to qualify our optimism with one note of caution. The word “gold,” is anathema to both Mr Chifley and Mr Nash, who do not associate it with the spirit of pioneers or with grit and independence and hard work, nor yet recognise it as a valuable dollar earner and natural resource. It is possible that, mesmerised by the high profits of isolated producers, they may impose a tax and negative the promise devaluation has given the industry.