Stock Production. I.Classification of stocks (fonds) A.White stocks B. Brown stocks.
Evaluating Mining Stocks: Discovery Interest
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Transcript of Evaluating Mining Stocks: Discovery Interest
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+ Evaluating Mining Stocks: Discovery Investing
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+ Interview with Chris Berry
• Chris Berry is the founder of House Mountain Partners, LLC.
• House Mountain has created a system for evaluating junior miners
• Their system works for evaluating companies who don’t have reputation of
larger firms that have been established in the industry.
• For more about House Mountain Partners:
• http://house-mountain.com
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+What is Discovery Investing?
“We have pioneered an investment philosophy called ‘Discovery Investing.’ It’s a
different approach to risk and is a road map that lends itself nicely to micro and
small cap companies.
We believe that all wealth creation begins with a discovery, whether it’s a gold
deposit or a cure for cancer. With that in mind we look at 10 factors that are
designed to evaluate junior companies.”
- Chris Berry
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+Major Factors in Discovery Investing
When he spoke with Gold Investing News, Chris Barry outlined that most of
factors affecting the value of a junior mining company relate to the deposits the
company has access to. Specific factors include:
• The Size of the Deposit
• The Location of the Deposit
• The Ownership of the Deposit
• Experience and Quality of Management
• Potential and Immediacy of Production
• Financial Footing
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+The Size of the Deposit
To determine whether a deposit is a “company maker”, House Mountain
suggests first looking at the total size of the company’s mineral deposits.
This is usually based on:
• Grade of the mineral deposit
• Tonnage in the deposit
• Intangibles such as location
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+The Location of the Deposit
As an investor analyzing a junior mining company, it’s important to ask
yourself, is the deposit in a mining and business friendly environment?
Location factors to consider:
• Transport costs
• Business jurisdiction
• The threat of expropriation
• Political instability
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+The Ownership of the Deposit
The control that the company in question holds over a deposit weighs heavily
on future profits, and takeovers. Questions investors should ask include:
• Does the company own 100 percent of the asset?
• Does the company have underlying royalties to pay?
• What do joint venture partners bring to the table?
• How ultimately will joint ventures affect profit margins?
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+The Experience and Quality of Management
Management can make or break a company’s long term potential. In relation
to junior mining companies that are looking to start production on an asset, it
is beneficial to know:
• Has the management team gone through the procedures before?
• Is management information accessible on the company website?
Generally, the more experience the management team has, the better.
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+Potential and Immediacy of Production
The potential and the immediacy of production on the deposit is essential to
realizing profits. The longer the process to get a mine into production, the
greater the courage and patience of the investor. Questions to ask include:
• Is the project a “new discovery”, > 10 years from production?
• Are there permitting and environmental issues?
• Has the company acquired a past producing mine?
Past producing mines can return to production quickly.
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+The Company’s Financial Footing
You can then do the math to determine what the company is
worth relative to its peers in the market.
• Many junior mining companies are yet to create cash flow
• Enterprise value is considered the “take-over” value of
the company
• Enterprise value = Market cap + Debt – Cash
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