With some sense of irony one could state: “Junior mining is a mine field.”
Over the last few months, I have been posting just twice on a junior mining company worth taking a closer look at:
Formation Mining: http://gwyde.blogspot.com/2010/06/formation-metals-opnieuw-een-penny.html, and
(Both postings are in Dutch, though some Google Translation activity suggests they might have drawn wider attention.)
In my posting on Formation Metals, the awkward sentiment (mainly a self-fulfilling downward price spiral out of fear for dilution through raising capital under unfavourable terms) was balanced against the fundamental undervaluation. I suggested it was a suitable pick for not-faint hearted contrarians, as it was not sure when the downward draft was to cease. As was stated: "Negotiations were going on, but confidentiality requirements prevented management to make any disclosure". Only vague potential perspectives were revealed. Investors were not convinced and sent the stock even lower in the summer doldrums.
September brought some relief as analyst Peter Grandich sounded rather optimistic in his assessment. To cut things short: Formation got the commitment for a 46.3 M$ recovery zone facility bond. Additional funding under solid waste private activity bonds ("SWBs") will add up to 45.4 M$, thereby drastically reducing the financing need through capital raising. The stock rose by nearly 40% last few days on the good news. Closing at C$ 1.46 today, it nearly doubled since the lowest close at C$ 0.76 on July 13, but even at the present level, it is still down over 23% year-to-date. Overvalued? I hardly dare to pronounce the word.
In August, I posted on Genco Resources. The stock was down because of poor operational results in the quarter it was resuming activity at its ‘La Guitarra’ silver mining site. What did you imagine, stellar profits for a mine put ‘under care and maintenance’ for over a year? Even the previous 2009 bottom of 0.25 C$ didn’t hold, whereas the stock had soared less than a year ago because of an unexpected increase of the resource base and the potential (in a feasibility study) for an almost tenfold increase in production. September once more brought some relief as investors returned to their senses. Just a few hours ago, trade was suspended as the news on a merger deal between Genco and Silvermex was to be announced. The stock just closed at 0.44C$, up 24% for the day.
Lucky Junior Mining picks… ok I may have less fortunate mining picks as well, but at least I didn’t post on them.