Issue link: http://resourceworld.uberflip.com/i/517266
20 www.resourceworld.com j u n e / j u l y 2 0 1 5 i n s i g h t s & i n v e s t m e n t s B a r r y M u i r T hese days it takes nerve and patience to purchase a junior explorer. The Toronto Venture Exchange is hover- ing at its lowest point in over 13 years. Liquidity is low and good news is often met with selling pressure, without any sustained buying to buoy up share prices. The summer doldrums ahead may add to the leverage we can achieve by owning a few of these oversold companies. Some of these juniors have share prices below what their working capital alone should indicate. With share prices so low, there is an opportunity for an investor to acquire a relatively large position in a com- pany that meet the criteria outlined below. While nobody can say exactly what com- modities and resource stocks will do in the future, the astute investor will conduct his own due diligence comparing the values and assets of resource companies with a view to finding the ones with good fundamentals. Over the years, I've learned to grade companies in five specific areas: Cash on Hand: The cash component can be the most revealing about a company. We can look closer at the details of financings, how the funds have been managed and the monthly/annual burn rate of the company – what is required to pay their bills and keep their properties in good standing. Market Capitalization: The market cap is simply the number of shares multiplied by the share price which allows us to make comparisons to similar companies. Shares Outstanding: As the number of shares increase it adds to the dilution. In some cases a share consolidation may be necessary for the company to raise further funds. Political Stability: Certain countries are safer than others to do business in and some countries should be avoided all together. The senior producers will tell you they don't care where the property is but for a junior, Manitoba or Nevada can make a lot more sense than Honduras or Kenya. Management: Proven management with a positive track record is always a key factor in the evaluation process. Timing is everything but rarely is it perfect. Whether it's the summer doldrums or tax loss selling in December, seasonality or closeness to infrastructure, all we can do is take the same information everyone else has access to and ask ourselves what is going to be different in six months or a year from now that will add value to our picks. The following companies score high using the above criteria. In every case, the company's working capital is significantly higher than its market capitalization. INDEPENDENCE GOLD CORP. [IGO- TSXV] Current Price: $0.08; Working Capital: $8.7 million. Market Capitalization: $3.5 million. Shares Outstanding: 43.8 mil- lion. Management: Randy Turner, CEO. Independence Gold is currently focused on their 3Ts property 185 km southwest of Prince George, BC. The property has a NI 43-101 inferred resource of 5,452,000 tonnes grading 2.52 g/t gold and 71.5 g/t silver, at a cut-off grade of 1 g/t gold. Contained ounces are 441,000 ounces of gold and 12,540,000 ounces of silver. Randy Turner guided Winspear Diamonds Inc. from discovery at Snap Lake through to its sale to De Beers Mining and the sale of Silver Quest Resources to New Gold Inc. RyAN GOLD CORP. [RYG-TSXV] Current Price: $0.115. Working Capital: $21 million. Market Capitalization: $13.5 mil- lion. Shares Outstanding: 117 million. Management: Murray John, CEO of Ryan Gold and President of Dundee Resources Ltd. Ryan Gold was started by Shawn Ryan who has a following in the Yukon where the company has several properties. With the depth in management and the large cash position, it will be an interesting company to follow in the coming months. ETHOS GOLD CORP. [ECC-TSXV; ETHOF- OTCQX; 1ET-FSE] Current Price: $0.15. Working Capital: $8.5 million. Market Capitalization: $6.6 million. Shares Outstanding: 43.5 million. Management: Gary Freeman, CEO. Freeman was President and CEO of Pediment Gold Corp. when it was acquired by Argonaut Gold Inc. in 2011. The company holds one property in the Yukon but the value here is also in its large cash position and depth of manage- ment. The company has remained quiet for a long time. CLIFTON STAR RESOURCES INC. [CFO- TSXV; CFMSF-OTC; C3T-FSE] Current Price: $0.21. Working Capital: $14 million. Market Capitalization: $9.6 million. Shares Outstanding: 48.2 million. Management: Michel Bouchard, CEO. The company has six mining properties, all in Québec, with a focus on their past-producing Duquesne Mine Project. The property has a NI 43-101 indicated resource of 199,000 ounces of gold at 3.3 g/t and an inferred resource of 280,000 ounces of gold at 5.58 g/t. In March of this year the company announced a completed private placement to two purchasers at a price of $0.60 per share for total proceeds of $5,727,343. STRATEGIC METALS LTD. [SMD-TSXV] Current Price: $0.29. Working Capital: Cashed-up companies worth watching