Issue link: http://resourceworld.uberflip.com/i/113113
IN V ES TMEN T Finding a good mining stock W hen choosing a stock to invest in, a good strategy is one that works whatever the markets are doing. The fundamentals don���t change. In bearish markets, however, wise investors look at potential investments with an increasingly critical eye. Management, jurisdiction and sectors are scrutinized as increasingly aware investors sift through news releases and company websites. There are things an investor can do to separate the wheat from the chaff in an effort to reduce their investment risk in a market where, though money is tight, there is still money to be made. Higher risk does mean higher reward and the stage of development at which the company is operating determines the level of risk. From high to low risk, the types of mining companies are: ��� Companies that are grassroots explorers with no discoveries ��� Companies that have discovered deposits ��� Companies that have defined deposits ��� Companies that are in the mine planning stage ��� Companies that are in production More and more investors are interested in companies in the middle stages. These are companies that have defined their deposits. Stocks of these companies are often a bargain compared to the stocks of established producers and they have the potential to make substantial gains. Exploration funding is difficult to come by in today���s market and a defined economic deposit is a proven asset that speaks to the determination and soundness of the management team. The asset isn���t going anywhere and if it is economic enough, it will eventually be put into production. That is not to say that an investor should avoid investing in exploration companies. In fact, due to the reluctance of today���s investor to invest in early stage companies, there are deals to be had and an astute investment in the right early stage company is where the highest investment gains can be made. However, with over 2,000 publicly-trading exploration and mining companies trading on Canadian stock exchanges, how does an investor find a suitable candidate for his or her hardearned investment dollars? O bviously, good information is of prime importance. It only makes sense to seek out publications that can benefit your investment plans. There are number of excellent newsletters that cater to resource stock investors, including those published by: ��� John Kaiser (www.kaiserbottomfish.com) ��� James Dines (www.dinesletter.com) ��� Lawrence Roulston (www.resourceopportunities.com) ��� Jay Taylor (www.miningstocks.com) ��� Doug Casey (www.caseyresearch.com) ��� Paul van Eeden (www.paulvaneeden.com) In addition, Stockwatch is a daily electronic and paper magazine that publishes press releases of publicly-trading companies 30 www.resourceworld.com Alf Stewart, a geologist and broker with Raymond James Financial, told Resource World how he identifies mining stocks to put on his radar as potential investments. ��� atch the daily volume and value leaders on the TSX Venture W Exchange where most of the emerging junior exploration companies trade. ��� Keep your eye out for new and unfamiliar company names. ��� rack the new business activities of successful individuals. With T junior companies, high-quality management is everything. There is a ���halo effect��� whereby a person���s success in one project bodes well for success in the next one. These people tend to attract new investors when involved in a new project. ��� Pick a sector where metal prices are robust, or contrarily, one that is out of favour but has good potential in the future. ��� Look for a company���s project that you can understand. ��� Management must have a clear and sensible business strategy. ��� Look for a company that is not exposed to excessive risks ��� political, civil, environmental, impossible location, etc. A company���s share prices can plummet when the government of the country they are operating in changes the rules and shuts down their operations. ��� Look for emerging, early-stage stories. ��� Look for projects that have enough information to enable a reasonable evaluation. (www.StockWatch.com). Subscribe to other publications that focus on mining stocks with a slant toward investing ��� Resource World magazine, for example. Find a broker who specializes in mining stocks. Most Canadian brokerage houses have several investment advisers, some of whom are geologists that use their expertise to find good junior exploration and mining stocks. It���s a good idea to attend resource investment conferences such as those presented by Cambridge House International (www.cambridgehouse.com) and International Investment Conferences (www. iiconf.com). If you pre-register, these conferences are free and it���s a great way to meet the management of your companies of interest at their booths. These conferences are a real bargain in that the world���s most knowledgeable speakers provide fact-filled and stimulating talks that can really raise your level of understanding and sophistication when it comes to participating in the resource sector. Keep in mind that geology is full of surprises, both good and bad. It���s impossible to know exactly what a drill bit will encounter when testing a promising anomaly. While you can���t know if a project will go into production or be bought out by a major, you can greatly increase your chances of success by researching a project���s history, management, economics, plans and assets. n MARCH 2013