How to Pick a Winning Junior MinerHow to Pick a Winning Junior Gold Miner
https://www.theglobeandmail.com/globe-investor/investment-ideas/how-to-pick-a-winning-junior-gold-miner/article1881450/
I found this article on the Globe and Mail website yesterday and thought it would serve as an acid test for my investment in Halo Resources so I reproduced excerpts from the article below, along with my own commentary in bold. While the article is focused on Gold, the rules can easily be transposed to any miner.
Here are some simple, common sense tips to help pick likely winners in the sector, courtesy of newsletter writer Ian Gordon at British Columbia-based Longwave Group, who outlined 25 rules for selecting junior miners in a recent missive to clients.
I tried to locate the article outlining all 25 rules for selecting junior mines but was unable to do so. So I only had the rules outlined in this article to work with. If someone can find the article in its entirety, please post it here.
Among his ideas: He says investors should try to focus on companies that have land positions around existing or former mines, under the theory that this is probably where more gold can be found at the lowest risk.
The Sherridon VMS Property covers an area of over 20,876 hectares and hosts the past-producing Sherridon Mine that was operated by Sherritt Gordon Mines from 1933 to 1950 and produced 7.7 million tonnes of ore grading 2.46% copper and 0.8% zinc
He also advises seeking out juniors with minority stakes held by senior producers, a sign that deposits are promising.
After the latest $4.5 million financing HudBay will hold up to 14.5% of the issued and outstanding shares of Halo on a non-diluted basis and up to 19.9%, assuming full exercise of the Warrants by HudBay
Another place to begin sleuthing for juniors with above average potential is in the holdings of fund managers with gold mining acumen. Mr. Gordon says these include Pinetree Capital, Sprott Asset Management, Van Eck Global and Tocqueville Funds. The money managers often publish their holdings online, making it possible for outsiders to peer into their portfolios.
On October 5th, 2010, Merchant bank Pinetree Capital (TSX:PNP) said that it has acquired additional shares in Halo Resources, which could represent up to 9.9% in the company, increasing its stake in Halo to potentially 17.6%.
For stocks trading under $1.50, Mr. Gordon also restricts purchases to companies whose prospects are so exciting that their stocks could plausibly double in 10 months. The shares don’t necessarily have to rise by that much, but should have potential catalysts, such as great exploration results, that would cause sharp upward moves.
In my humble opinion, I believe that Halo Resources also fulfills this criteria as any number of events (results, partnerships, JV's, production, NSR cash flow, etc...) could cause the shareprice to potentially double in 10 months.
This was all the criteria I had to work with as per the article, but Halo Resources seems to be bang on with each one. It was for these very reasons that I became a Halo shareholder, and will continue to be one as long as Halo continues to fulfill the above criteria.
As always, the above is my humble opinion.
Regards,
The 300