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Epic fall of LionGold shares from $1.70 to $0.003

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If you are one of those retail investors who had bought LionGold shares at the dizzying height of $1.70 per share and still holding on to them, you might as well write off the investments. After all, the shares are worth nothing and is now trading at $0.003. The epic fall of LionGold shares from $1.70 to $0.003 represented one of the most dramatic penny stock crashes in Singapore stock market.

LionGold, together with Asiasons and Blumont, were penny stocks but rose spectacularly to new highs from 2012 to 2013. The trio of stocks then went into a free fall at the same time, causing many retail investors to lose huge amount of monies. The huge swings of these stocks had led to speculations of foul plays. SGX, which takes on the role of both regulator and operator, was also blasted for late intervention and lax enforcement.

LionGold is a gold mining company with primary concessions in Australia and Ghana. Investors need to understand that investing in gold mining stocks is different to buying physical gold because the risks involved are inherently very different. Investors who bought LionGold shares and subsequently lost a fortune must have learnt this lesson a painful way.

stock market

Firstly, investors need to understand that the major issue of gold mining company is the exploration risk. Out of 2000 projects with potential of gold to be mined, typical only six or seven would prove to be successful. And it takes several years to determine whether the extraction of gold would be profitable. Many gold buyers have no idea the painful process of mining raw gold and turning it into investment-grade gold!

Cost control is the second risk. Companies which are unable to exercise disciplined cost management would face huge cash-flow problem because gold mining is capital-intensive and consumes a large amount of energy. That was why when gold spot prices fell below certain prices, miners would be affected because of the unsustainable costs of mining the gold ore and refining it into pure gold.

In LionGold’s case, many investors were lured into buying the shares during the peak of the gold’s bull run from 2012 to 2013. Instead of buying physical bullion, many investors thought that buying gold mining shares is the best route to making money. Many of them don’t even realize the risks involved and didn’t even question the rationale for its unexplained massive price surge in 2013. Subsequently, many investors lost their fortunes when the share price crashed.

The story of LionGold was just one of the many painful lessons for Singapore investors keen in investing in gold. Many of them were told that gold and silver bullion do not generate dividends and incur storage fees. Because of these reasons, they thought that buying paper gold is the best way to invest in gold.

Actually if you bought physical gold and silver from a reputable bullion dealer in Singapore, there is no counter-party risk because bullion is actually money itself. Although you pay a slightly higher premium when you buy precious metals from a reputable bullion dealer such as BullionStar, you have a peace of mind that the gold bars are authentic. In my point of view, this is definitely worth it than losing sleep over stock market crashes that wipe out your gold mining shares’ values.

In Singapore, you can choose to buy gold and silver bullion from BullionStar, one of the largest bullion dealers with more than 370 bullion products. The company has a unique retail shop, vault and advanced online system providing a one-stop shop for wealth builders to view, online purchase, collect, deposit, store, value, sell, audit or physically withdraw bullion.

gold

BullionStar also offers customers their own minted gold and silver bars with zero spread. They have commissioned world-renowned LBMA-approved Swiss gold refiner Argor-Heraeus to produce these stylish and unique minted 100 gram 99.99 % purity gold bars.

Below are some gold bullion offered by BullionStar that are worth buying:

  1. PAMP Gold Bar – 1kg
  2. American Gold Buffalo Various Years
  3. BullionStar Mint Gold (No Spread)

Singaporeans who still think that buying paper gold is the best way of investing in gold should wise up. Instead of risking your hard-earned money, start buying real physical gold from a trustworthy bullion dealer.

Join me in my investment journey and read my financial adventures for free! Through the sharing, my vision is improve and change people’s lives. In school, we don’t learn how to budget, manage our finances, build wealth and invest our money. Instead, we are taught useless subjects which we would never put to use most of the times during our working lives.

Yet, managing our money is an important life skill that is critical to our survival in the society. Many people start to realize how it is importance of managing money only when they face the prospect of financial ruins, by then which would be too late for remedies. Thus, I started this blog to share articles on finances which I aspire to make a positive impact in others’ lives.

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SG Wealth Builder

 

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Updated: October 29, 2017 — 4:31 pm

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