Golden Prospect

Golden Prospect is a diversified investment company with strategic holdings in the junior end of the natural resource sector. Given the quality of the portfolio's constituents we are not surprised that the shares have advanced in tandem with increases in base metal prices. We expect that the recent acquisition of a leading mining finance business will further boost the company's exposure to the commodities and natural resources boom.

Canadian listed Uruguay Mineral Exploration is the company's largest portfolio holding and is performing solidly. Annualised gold production at the San Gregorio deposit in northern Uruguay is expected to increase from 60,000 ounces to around 100,000 ounces when the new Arenal mine is opened later this month.

The second largest holding Australian listed Perilya which owns, Broken Hill, one of the world's largest lead, zinc and silver mines. Despite a recent production setback due to an unusual seismic event', we remain confident that the mine will be a key growth driver. The plant will still be able to support throughput capacity of 2.1 million tonnes per year over the next decade.

The third largest holding is AIM listed Jubilee Platinum which focuses on exploration in platinum metal projects, predominantly in South Africa and Madagascar, but also has interests in Canada and Sierra Leone. Jubilee is currently seeking to acquire highly prospective exploration properties in South Africa. We are also heartened by the reserve potential at the company's properties in Madagascar following recent discoveries of significant copper and zinc mineralization.

Golden Prospect holds a 6.7 percent interest in Centamin Egypt which controls the 3 million ounce Sukari gold project. Centamin had been facing significant difficulties due to the Egyptian Government's decision not to renew employees' security permits. However the outlook has improved following the installation of a pro-foreign investment cabinet in July.

In addition to other listed investments Golden Prospect also has two highly prospective exploration licenses in Sierra Leone, West Africa. The York platinum and the Lake Sonfon gold and diamond exploration proprieties are being joint-ventured with Jubilee Platinum and Mano River Resources respectively. To date we have been highly encouraged by reports of significant diamond and indicator minerals in Sierra Leone.

Last month Golden Prospect announced the acquisition of Ambrian Partners Limited, the London based investment banking and institutional brokerage firm focused on the mining and metals sector, for around £2.2 million. The deal will permit access to Ambrian's impressive client base and diversify Golden Prospect's value proposition away from a balance sheet based one to an earnings based model.

We believe we are currently witnessing the early stages of a resource bull market and we expect Golden Prospect's diversified portfolio to out-perform in this context. We expect that strength in bullion in particular will be driven by further weakness in the US dollar (with which gold is historically inversely correlated), as the world wakes up to the implications of America's twin budget deficits. We expect increasing levels of geopolitical tension will also generate further strength in the gold price.

Golden Prospect is currently trading around current net asset value, however this excludes any attributable value towards the company's joint venture exploration projects. We expect the shares to undergo further re-ratings as the potential of key exploration assets is realised and as the bull market in precious metals gains momentum.

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