Golden Prospect
03/22/2005
 Recently Golden Prospect (GOL) announced an impressive full-year result. The diversified investment company, which takes long-term interests in emerging resource companies, benefited from last year's strong performance in the mining sector. We believe the company's prospects are equally attractive this year.
In 2004, Golden Prospect took advantage of the buoyant resource sector and realised select gains on their investment portfolio. This contributed to a 68 percent rise in group revenue to ?10.1 million, while pre-tax profit increased 107 percent to ?4.5 million. We are pleased to note that this year the company intends to continue exploiting the buoyant equity market by converting into earnings a substantial portion of the group's remaining ?14.9 million in unrealised gains.
Last year nearly 60 percent of group profit was attributable to realisations of strategic investments with the remaining 40 percent derived from trading and investment banking activities. In an attempt to further diversify the group's earnings base, GOL recently purchased a corporate advisory and broking firm, and interests in two web based publishers.
Golden Prospect's largest holding is in the Canadian gold producer Uruguay Mining Exploration (UME). UME operates Uruguay's only gold mine. Quarterly gold production for the period ending November was 15,934 ounces. Production at a second development mine will be ramped up to full capacity this year.
The second largest holding in the group's portfolio is the Australian mining and exploration company Perilya (PEM). Perilya's Broken Hill mine is one of the world's largest lead, zinc and silver mines. PEM's quarterly result to December 31 2004 was solid with robust zinc and lead production exceeding the previous quarter by 25 and 13 percent respectively. The company also recently exercised an option to purchase the Daisy-Milano gold project, which it expects to produce 50,000 ounces per year with a current mine life of at least five years.
The third largest portfolio holding, Jubilee Platinum (JLP), announced in January that a follow-up geophysical survey at the company's Madagascar tenement confirmed earlier geochemical sample findings. Jubilee believes the project has the potential to develop into a world-class nickel, copper and platinum deposit. In December, Jubilee resolved its interest in the Tjate property (South Africa). The project is estimated to contain 65 million ounces of platinum group metals and gold.
We believe Golden Prospect's strategic portfolio of small exploration and development companies offer significant upside in the year ahead. In addition, the company holds a small number of unlisted exploration interests that are potentially worth more than the current book value. The diversification into corporate advisory and web publishing offers further earnings scope in our opinion. We are impressed by Golden Prospect's performance last year and remain excited by its long-term prospects.
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