Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
This week’s discussion topics:
I. Decent progress on (new) shorter-term trades
II. Cash- rich juniors – Virtual Vulture Fund
III. Updated gold valuation tables
Nero is turning over in his grave
Greece continues to weigh heavily on this market and while I understand the ramifications of their defaults, it is a good thing I am not responsible for deciding upon their financial lifeline. That country has a very long history of fiscal mismanagement and loan defaults. Even if they are bailed out, they will be back begging for more a year from now and blaming everyone else for their problems.
I think a huge percentage of the North American population is tired of seeing their portfolios eroded because of the problems in the European Union. And we are equally sick of hearing about it every day in the mainstream media. If countries like Greece or the PIIGS have to default, get it done and let the banks and regional governments absorb the losses – obviously it’s not that simple – but it would be great if it were.
As financial historian Niall Ferguson recently suggested, the end result may be a Federal State of Europe. If that is what it takes, then so be it. Apparently Greece will be completely out of money in six weeks. Whatever their solution, it is nothing more than placing a small bandage on hemorrhaging PIIGS.
I.Update on new (short-term trades) service
A few weeks ago I started a new (free) service for Ticker Trax subscribers and Stockhouse readers. It entails posts to our Stockhouse board and also posts on Twitter (with optional text message to your phone).
Given the volatile nature of this market I am being extremely picky with alerts but there hasn’t been a lot tangible the past couple weeks in the micro-cap space. Considering the weak environment, though, here is what we have followed:
1) RNX alert at 0.38 May 14th – currently up 10%
2) EKG alert at 0.36 May 23rd – currently up 25%
3) INT alert at 0.40 May 23rd – currently up 5%
4) PEC alert at 0.08 May 25th – currently up 15%
The most painful of the past week was an alert on GQC I sent out the evening of May 23rd when they issued exploration drill results. Because the news came after market, it opened strong at 0.23. Had they issued this news during trading hours we could have seen a gain of almost 400% (the stock is currently at 40 cents).
As it is, it was realistic to catch a gain of 70% if you bought the following morning at the open.
In the Friday reports I include a link to these alerts at the bottom of each article but you can also visit www.TSXAlerts.com for a basic informational page and links. Given the fact this market for small stocks has changed so dramatically this past year, I thought this new service was a good way to provide some extra “entertainment value” through the week.
Just keep in mind that the Alerts must either have shifting momentum in price & volume, or fundamentally strong news. If I deem a news release nothing but “promotional fluff,” I don’t waste my time with it (the risks of a pullback are too great) – it must also have decent volume.
II. Cash-rich juniors – Junior exploration virtual vulture fund
Following the 2008 financial collapse I put together a list of cash rich juniors that did very well and also following the tech bubble bust in 2001. At that time the list tracked 40 cash rich techs on NASDAQ that went on to gain several hundred percent (on average) within 18 months. For the most part this strategy works very well but it takes patience.
I don’t rank the companies as I don’t have the manpower to analyze the fundamentals of everyone. However, the theory is that those with plenty of cash have stronger fundamentals than others who have been unable to raise capital this past year. In addition, financing going forward will be extremely difficult and strong balance sheets are simply a component of survival.
The table will include about 100 junior exploration companies with a minimum $10 million and I am calling it my Virtual Vulture Fund. I will update financials as published and every couple weeks update the table with new closing prices in relation to cash value per share. Similar to the gold table I publish here each month, this is an extra tool I find very beneficial.
This will not be published in our weekend free updates on Stockhouse but if you’re interested it will be made available to paid Ticker Trax subscribers – a link to which is included at the end of this report.
III. Updated gold valuation tables
As you will see from the valuation table this month, the gold valuations per ounce have fallen to an average of $36 with 40% below $20 per ounce. This is one of the lowest ranges we have seen in a very long time. I noted last week that Keegan (KGN) hit an insane valuation equivalent to $2 per ounce (based upon their $195 million in the bank).
It is possible this signalled a bottom (or a capitulation) by junior resource investors. The level of pessimism was extreme and many have thrown in the towel. Even I threw up the white flag for the week and took a few days off – which is very abnormal. I have very thick skin when it comes to penny stock volatility but it seems to be wearing very thin recently.
Even if we did find a bottom the past couple weeks, don’t look for any miracle recoveries short term. The best we may hope for is a decent summer rally – at least in the junior gold stocks. They are now trading so low that the odds of “up” are looking much better than “down.”
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Standardized monthly notes for our gold tables
We have sorted the same table four ways so you can determine which format is the most useful.
NOTE: Due to limited space for website presentation, we are not able to display various additional notes for many of the companies. This may include additional copper or silver resources that were not taken into consideration for the valuation. Only resources that were specifically reported in a 43-101 report were included. Many of these companies own various other projects or assets that may add additional value. Almost all companies host a Powerpoint presentation on their website and this is a valuable tool for doing further due diligence.
(Please click on the individual table to see bigger size)
parative Chart of Junior Gold Companies - Sorted by EV / Risked Reserves - May 25, 2012
Comparative Chart of Junior Gold Companies - Sorted by Net Debt (Cash) - May 25, 2012
Comparative Chart of Junior Gold Companies - Sorted by Total Gold Ounces - May 25, 2012
Comparative Chart of Junior Gold Companies - Sorted by Company Name - May 25, 2012
IMPORTANT NOTE: Our Ticker Trax Comparative Gold Analysis is an educational tool. If you are not a professional money manager we strongly suggest working with a qualified investment advisor prior to making any investment decisions based upon these tables. Once a month we will update this analysis and publish it on Friday afternoon with any relevant notes.
GOLD TABLE REFERENCE NOTES:
Measured Mineral Resource: is that part of a resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of a deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Indicated Mineral Resource: is very similar to the Measured classification but the resource can be estimated with a level of confidence “sufficient” to evaluate economic viability of the deposit. This classification is much stronger than Inferred but still makes a significant number of assumptions. Most junior exploration companies in Canada report Measured & Indicated (M&I) in the same category.
Inferred Mineral Resource: is that part of a resource for which quantity and grade or quality can only be estimated on the basis of geological evidence that involves limited sampling and reasonable assumptions. The estimate is based on limited information gathered from locations such as outcrops, trenches, pits, workings and a very limited number of drill holes. The inferred category is similar to saying “we have a reasonable expectation the minerals are there but have yet to prove it through sufficient drilling”. Moving a resource from Inferred to M&I can be time consuming and expensive.