Morgan Stanley Capital International selected Lepanto Mining B (stock code:  LCB) to be part of its MSCI Small-Capitalization Global Indices effective Nov.30. 20 11.

The admission of Lepanto’s share into the reputable world-wide index means that the LCB stock will be offered to the small -capitalization global equity market by no less than the Morgan Stanley equity global network. 

This positive news will certainly increase the value of LCB and its domestic counterpart, known as stock code LC.

When the report became public on Wednesday, November 16, LCB, together with LC, started to move up until the trading week’s close on Friday, November 18.

LCB (available to foreigners) jumped up from P1.32 to P1.59 while LC, climbed from P1.26 and finished at P1.43.  The increase in prices provides a gain of 20 percent for LCB and for LC, an increase of 13 percent in value. The daily gain happened during the bear market (when values were down).

Why did MSCI choose LCB to be a part of its MSCI low-capitalization global equity index? The probability that Lepanto will become a partner of the fourth world largest gold producer is getting closer to reality.

First and foremost, the verdict now is becoming clear that Gold Fields Mining (the fourth largest gold producer in the world) will definitely push through with its acquisition of 60 percent of Lepanto’s mine field, the Far Southeast Gold Project, by March 20, 2012 after the second payment of $66 million sometime in September this year.

Moreover, the statement given during the Q3 2011 results – Earnings Call Transcript by Gold Fields’ CEO, Nov. 10, 11 quoted below affirmed this conclusion:

We expect to fund the balance of the $340 million before the middle of next year, which would then vest a 60% interest in the project and so far, we can see a very little reason why we would not proceed to take our 60% interest in this very exciting project.

Second, the initial reported gold-reserve quality and quantity of FSG is now validated, and the continued drillings keep on showing positive results on the extensiveness, depth, and quality of the mineral deposits. Excerpts from Gold Fields Q3 report quoted below validated the extent of the ore reserves of FSG:

Exploration at the project continued with eight underground diamond drill rigs operating, drilling 10,745 meters during this quarter. The initial proof-of-concept drilling program was completed and broadly confirms that the scale and grade of the deposit is consistent with initial expectations. The higher grade mineralized zone (1.5 to 2.5 grams per ton gold equivalent) central to the porphyry body has been confirmed by the recent drilling. This program also demonstrated that significant upside potential exists at depth and in most lateral directions.

Third, the recent concluded acquisition of the adjacent Mankayan gold field by Lepanto’s FSG by Gold Fields in October of this year from the Australian majority owner  will make Gold Fields Mining the sole operator of the two major gold mines.

When LCB is formally introduced by MSCI in their index come November 30, the jury is out to expect higher value-added stocks.


The next rising stocks


We have been constantly analyzing various stock picks. Aside from the mining sector, our analysis has always pointed to one direction. We are now forecasting that the next promising stocks will be on the tourism, leisure, and entertainment counter. These stocks are Alliance Global Inc. (stock code:  AGI), Belle Corp. (stock code:  BEL), and Leisure & Resorts World Corp. (stock code:  LR).

As of this writing, the prices of these stocks are on the rise, but opportunity to buy would always be there.  As mentioned in my first column, Stock Investment 101, the price dips in the market occur in numerous occasions during the month.  All you have to do is to watch for it.  The second dip that precedes the first should give you a good price range to enter.

To all my colleagues and trade partners, we will have our monthly stock meeting on November 28 at the Elks Club, 7th Floor, Corinthian Plaza , Paseo de Roxas, Makati , from 6 to 9 p.m. We will be presenting our stock picks for 2012.

If you have any questions about my column in particular or the stock market in general, please feel free to contact me by email www.philippinegolddiggers.com

Till next week.

In the meantime, keep your mind on your money and your eyes on the market.