The Sunday Morning Post - The Junior Checklist This morning I thought I would share my checklist for my junior exploration companies. You may find it an interesting read. My investment style is to pick what I consider the best overall with my criteria. I consider myself a stock picker. I never hold more than 10 stocks, and the top 5 get most of the money. These ratios may change depending on current circumstance. Today I hold 3 juniors, one in each of three of some my favourite commodities. I don’t like holding too many as it loses my focus. I research my picks thoroughly, the deposit, the market, the majors, the area, and the management. Once it becomes a top pick, I stick with it, and wait for the return, while monitoring. I believe if it is a unique hard asset and meets my criteria it will give me oversized returns with low risk, and has worked very well for me.
I will adjust though between the top picks if necessary. For example one of the 3 goes on a huge spike; I may trim and send it to my 3
rd that just went on a big pull back, It gets all gets balanced by percentage again. To me all 3 are going to give me oversized returns, passing small percentages between them, just increases my stake in all the best. For my thesis I don’t really care what it trades at, but will take advantage of the emotional markets swings, but not actually leaving any of my 3.
So obviously PLS is one of the 3 (#1). Split between AMW and FCU, but will become one soon. So FCU/AMW just recently got rebalanced to the upside do to the oversized pull back, also because I want both spincos. I first added FCU when it was 55 cents (Not top then), as the deposit firmed up, I continually added more before it became the top pick. I always balance the high return with the pounds check. The reason I hold both (only recently) is I am just splitting the same main deposit but increasing the spinoffs. With AMW you will instantly get more of the prize of PLS, but less of established spin-offs, and good management. With FCU you a little less of PLS, but a lot more spin off value, and good management. It just spreads it out on the actual same play. Not only is this deposit undervalued, these spinoffs have NO price built in the current price, because it’s all undervalued. I will get 2 exploration companies for free, and the best Uranium exploration resource currently in the world. The spin offs, well they were free, and I like both managements, I will just let it ride until a reason not too.
My Checklist for Junior Exploration Company. I use to qualify and confirm when making my choices:
- Find a company with a unique, great, HIGH GRADE deposit. Not a good deposit but a great one. The bigger deposit the better. This is number one, if this is not checked, go no further. It’s all about the rock. It has to be a unique deposit, not one of 20-100 in that certain commodity.
- a) IF not an already 43-101 established deposit, it must already have sufficient amount of drill holes completed at a high grade to show a clear great maiden NI 43-101. This is so I can estimate pounds of commodity on the low side. It should have area geology and trend that shows expansion, therefore confirming hard asset investment. b) Already have a great 43-101 resource with an opportunity increase 35%-100% within one year of report (and/or sale).
- Time frame, does the candidate have the opportunity to give the big bang for the buck within 1-2 years.
- CASH – they must have enough cash in the bank to firm up a minimum of 30-50% more deposit before going for more financing this will reduce very unfavourable terms under highly dilutive financing.
- The deposit must be in a rising price environment for the commodity for years to come due to a long term demand increase and/or supply deficiency. This must be determined through multiple credible sources. What the commodity is used for and future uses plays a role in this. Uranium, graphite, zinc, cobalt are top priorities.
- PM’s may be considered but longer time frames must be taken into account as too many unknowns of commodity price and dead money may occur for some time. These may be good choice once market has clearly recovered. Due to market conditions, manipulation, central bank policies consider trading in and out as I see huge fluctuations. (Trend is your friend). PM’s in my opinion are very risky in short to medium term until a clear breakout to long term trend. A short-medium trade can produce and nice profit and redeploy capital to the top picks
- A deposit near major mining operations, to increase value, and raise possibility of a take-over candidate is a higher priority. A large established mining district adds value as well
- Exploration Company must have good management credentials. A history of successful sales to majors with current company or previous company is a key asset. Relationships with financial intuitions and the ability to raise capital are important. They MUST have skin the game with shares in the company
Look for a politically safe jurisdiction. - Consider a risker country only if they are so overly discounted because of a current location that the downside is very low, but the reward with be greater. An expected environment change in the near term would be helpful, therefore increasing the upside. The country must have established mining laws regardless of where it is.
If in the rare case you have chosen a politically risker country, it has to have a huge large grade deposit (too big to ignore), be very close to finance stage, and still meet the main criteria. Near term catalysts that create attention and changes the environment of the play is a bonus but must meet the main categories of criteria - Must be able to hold and wait for thesis to unfold in mid to long term
Cheers
Presclubs
(Disclosure:I hold a long position in FCU, AMW. I am not a broker, professional analyst, or work for a financial intuition. I am a retail investor. I do not receive commissions or compensation for posting. I have a group of friends who also are invested, and post on this site for their benefit and any other investors that find it relevant. It’s a hobby, enjoy it, and invest in this stock because of my belief of large potential returns with low risks. These are my personal opinions; investors should do their own due diligence on what to invest in. PLS club 1.1M)