Why African gold is cheap

At first glance, this successful penny-share gold miner looks to be an absolute bargain. But investors are right to be wary, says Tom Bulford. Here, he explains why.

"Penny share status is unattractive for many investors." So says Caledonia Mining (AIM: CMCL), which is going to consolidate its shares so that the current price of 8.5p becomes 85p (but holders will only have one share instead of ten).

You would think that the type of investor that Caledonia is attempting to attract with this manoeuvre would have the brains to understand the irrelevance of the nominal share price, which tells you nothing about a company's stock-market valuation. That aside, there is something much more unattractive about Caledonia than its share price, which I will come to in a moment.

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