Galahad's golden promise

JIM Slater is one of the stock market's most astute investors. So when he goes hunting for gold in Greenland, many will follow him. But read the small print before making up your mind.

Galahad Capital, which Jim and his son Mark set up as an investment vehicle, is buying Shambhala Gold, a private company with stakes in the Skaergaard prospect on Greenland's east coast, and in Northern Dynasty Minerals, which has a prospect in southern Alaska.

Slater pere, now 74, made his fortune at Slater Walker, crashed to 'minus millionaire' status in the 1970s, went on to found company monitor REFS, and played the market all the while.

He is highly optimistic about gold. Years of low prices have made new mining projects scarce. He reckons annual demand is 3,650 tonnes and supply only 3,250.

Central banks have been selling, but the rising price - $386 an ounce this week - has made them look foolish.

Slater thinks the best play is to buy into mining prospects early - after reserves are established but when production is some way off. Studying 78 companies, he found their share prices valued gold in the ground at an average $35 an ounce. Closer to production, this rose to $100.

Near the top of the value list was Skaergaard. It has gold, copper, platinum and palladium - but in low density and in far-off, forbidding terrain.

If prices fall, there may be no mine. Consultants warn that the project is 'at a very early stage of exploration investigation'.

A mine would need to be large and highly efficient - and could cost £500m. So could Alaska.

By that time Galahad - market value £9m - could have sold them on. But the £41m it is paying (in shares) looks hefty.

The Slaters are on both sides of the deal, having invested in Galahad and Shambhala. They say the terms have been vetted by independent director Paul Brigden. He is Galahad's finance director. He is leaving, but this is not an ideal definition of independence.

Galahad has sold its other assets and will repay investors some 4p a share. Mining veteran Ian Watson and Lord Wolfson of Sunningdale will join the board.

The new Galahad Gold shares begin trading on December 23. The price rose to 14 3/8p last week. After the 4p dividend, they could start at 10p.

There will be a whopping 498m shares in issue, so the two prospects need to be really good to shift the price. They will need more funding, and more share issues.

Fans say Northern Dynasty, quoted in Toronto, is already worth the whole purchase price.

The timing looks good, with the gold price climbing. But this is high-risk stuff.

Morrison to soar after Safeway

IF there is a winner from the regulatory excesses of the 10-month-old Safeway bid saga - apart from Competition policy wonks - it is William Morrison, the only food trade suitor cleared to bid.

The Competition Commission has all but handed Safeway to Morrison on a plate.

Sir Ken Morrison still seems keen to go ahead, but he could twist the knife by cherry-picking the Safeway stores he wants and offering to buy these alone.

Acquiring Safeway should accelerate Morrisons' already impressive growth rate, says Sandy Nairn, the former investment chief of Scottish Widows, who was previously head of research at fund manager Templeton.

The shares have risen to 224p, but he thinks fair value is nearer 290p.

Nairn's new fund management company Edinburgh Partners is launching investment trust, EP Global Opportunities. He will look for solid cash generators such as Morrison, Shell and Lloyds TSB.

Outside Britain, he says many Japanese stocks are now below their price when he began his career 20 years ago.