Tuesday, 10th January 2006 (3010 views)

High expectations are surrounding Lingbao Gold as it prepares to begin trading.

The company, China's second largest gold producer and smelter, is expected to begin trading its shares in Hong Kong on Thursday.

Its shares so far have been 1,200 times over-subscribed and it is expected to value its initial public offering at the high end of the indicative range of HK$3.33, China Daily reports.

If these reports are correct, then the company will raise by as much as HK$861 million in the Hong Kong IPO.

The impressive interest in the shares has been fuelled by the recent boom in the value of gold, which now stands at a 25-year high of $540 an ounce.

"With more private investors especially from the increasingly affluent India and China, as well as central banks, to put money in gold to hedge against the possible slump of the US dollar, gold prices have more upside potential," Alvin Ching, president of the Chinese Gold and Silver Society said.

Lingbao Gold will use the extra funds to increase its mining capacity.

With 80 per cent of its gross profits from smelting, mining currently takes a back seat in the company's interests.

However, Lingbao Gold is keen to satisfy 50 per cent of its smelting demands from its own mines by 2008, giving it an incentive to up production.

Investors hope the stock will mirror the performance of Hong-Kong listed miner Zijin Mining Group, which saw its shares rocket in value by 250 per cent over the past six months.

 

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