The following is a checklist of some of the things I think should be carefully considered when assessing Junior Mining Exploration Stocks.
1. Analyze prior promises: be extremely hardheaded and cynical in your assessment of your current and prospective Junior Mining investments. Critically analyze prior management promises against actual performance. In this regard, we suggest you focus on the track record of the Board and Management in raising money through private placements or prospectus offerings and converting those equity raises into NI 43-101 Resources or Reserves believed to have a chance of commercial exploitation – or better yet, have a track record of developing Resources or Reserves and selling them to 3rd party producers. You can find (subject to the extent of a given company’s disclosure) some of this information in the Management Discussion & Analysis write-ups found in the Corporate Filings data component on each company page in StockResearchPortal.com (‘SRP.com’). I also suggest you speak directly with the President of each company, and canvas with him/her the prior experience and success of both the Board and Management team of their respective companies. I have yet to find a company President who was not receptive to speaking directly with shareholders. Please let me know by e-mail (at email@example.com) whether your experience in speaking with company Presidents is the same or different than mine.
2. Cash on hand: recognize that ‘cash really is king’, and that has never been more true than in today’s economic environment. Look for companies with enough net cash on hand (cash and equivalents less existing debt) to complete a meaningful exploration program on a promising property(ies), or to further prove up existing NI 43-101 Resources or Reserves. Both my personal experience and antidotal evidence has convinced me that companies with only limited cash or without cash continue to find it difficult to raise new equity, and if they are able tot raise equity they typically do so in today’s environment on highly dilutive terms. You can quickly find the net cash position of each company (as at its last reported fiscal quarter-end) by using the ‘Quarterly Comparator Ratios’ section of the Compare & Rank Companies feature found on the Main Navigation Bar of SRP.com.
3. Quality of assets: consider the quality of the properties owned by each company in the context of whether they may be attractive to an acquirer or merger partner. Given current market conditions I believe it is likely there will be significant merger/acquisition activity involving Junior Miners.
4. Bargain investments: in this market look for exploration companies whose current share prices might be bargains. I think you should review and analyze at least the following when making such assessments:
· evidence of experienced management – look for recent Board of Director and management changes that ought to bring ‘management enhancement’ to potentially interesting exploration properties (see the Board/Executive Press Release data component on each Company Page of SRP.com);
· cash positions that will enable further exploitation and potential exploitation of both exploration properties and NI 43-101 Resources or Reserves (see ‘Compare & Rank Companies’ feature on SRP.com as previously outlined);
· properties that are in stable political environments friendly to mine development (see ‘Country Detail’ under ‘Economic Research’ found on the Main Navigation Bar of SRP.com for up-to-date political and economic information on approximately 70 countries);
· properties that have or are close to existing transportation, utilities, and ore processing infrastructure;
· regularity of Press Releases announcing consistently positive drill results (see the Drilling/Discovery Press Release data component on each Company Page of SRP.com);
· properties that as they are further proven up might be of interest to major producers;
· current stock prices that are significantly below recent trading prices – particularly if the current stock price is less than a recent financing price where institutional and other ‘sophisticated’ investors participated and no material events have occurred between the closing of the financing and the current date (see Price & Volume Charts and Financing News Press Release data component on each Company Page of SRP.com);
· Insider Trading to determine if Insiders are buying shares (see Reported Trades by Insiders’ on each Company Page of SRP.com); and,
· daily average share trading volume in order to determine the likelihood of being able to liquidate your shareholding in a reasonably short period of time (see Price & Volume Table on each Company Page of SRP.com).
These are only some of the factors that comprise a detailed ‘checklist’ of things to consider when investing in Junior Mining Companies. I plan to discuss others in subsequent e-mails.
Ian R. Campbell