Kevin Goldstein-Jackson: Am I off my trolley?

Ihave never invested in Tesco, but I wish I had followed a friend who has been “in and out” of Tesco shares for many years – often making substantial profits. One example was when he sold shares, originally bought for 310p, at a price of 450p – and then bought back in at 312p earlier this year. By October 12, the shares were back up to 385p.

I have tried to persuade this friend of the attractions of Avocet Mining. But he never invested. If he had, I doubt he would have followed my disappointing pattern: first investing in September 2006 at 92.85p a share; increasing the stake at 95p the next month; adding more at just under £1 each in early 2007; failing to take any profits in 2007 and 2008 when the shares were over 200p; and buying more shares at 78p and 60p in October and December last year. Earlier this month, Avocet shares were 78.5p.

Avocet seemed attractive as it is a small gold miner quoted on the Alternative Investment Market (Aim), and I thought the gold price would rise to more than $1,000 an ounce. When the gold price did rise to this level, Avocet shares remained lacklustre. Why?

On November 12 last year, Avocet announced interim results showing a profit of $22.5m – down from $26.3m. Costs of producing gold had risen from $348 per ounce to $514 but Avocet had plans to cut costs at its operations in Malaysia and Indonesia.

In April this year, Avocet announced an all-share offer for Oslo-listed Wega Mining . This takeover was completed in June. That month, Avocet announced results for the year to March 31: a profit of $24.2m – down from $31.9m.

Avocet aims to produce 230,000 ounces of gold a year from its Malaysia, Indonesia and Africa interests “by the middle of 2010”. Hopefully, any remaining former Wega shareholders will retain their shares in Avocet, the gold price will remain high and mining costs will eventually reduce.

Kevin Goldstein-Jackson is an active private investor writing about his own investments. He may have a financial interest in any of the companies, securities and trading strategies mentioned.