Speaking at the Newsletter writer’s session on the first day of the 2014 Prospectors and Developers Association of Canada, John Kaiser looked at 5 reasons a junior mining stock might outperform that are unrelated to whether or not metal prices rise.
Such strategies are important Kaiser explained, because no longer can investors expect mining companies to get any significant help from metal prices.
The first strategy, according to Kaiser is to look for companies where there is currently a discount being applied because of potential permitting risk.
While acknowledging the risks involved in such investments, Kaiser explained, “the real bet is whether or not the company is going to make it through feasibility without an explosion in capital expenditure budgets”.
Number two on Kaiser’s list, is a strategy focused on looking for companies who have tackled a deposit in a new way. And, where there is the possibility of a new find within the current discovery. For instance, going after higher grades within a lower grade halo.
Third on the list is the prospect generator strategy. While Kaiser acknowledges that this isn’t a new strategy in the junior mining space, there are still areas where it can prove a valuable one to follow. But, he says, one has to look for a new approach.
“The company must be looking in a new jurisdiction,” for example, or, “if it is an old jurisdiction, there has to be a new theory,” he says.
The fourth thing to look for, Kaiser says, is a company that has more than one strategy in play at the same time.
According to Kaiser a company that has a multi-angle exit strategy, such as providing ore to another miner’ under utilized mill, irrespective of whether or not their primary focus delivers as expected, is likely to produce solid returns.
The fifth manner in which Keiser says, a junior miner can grow in value terms, regardless of whether or not prices are rising, is through the use of new target generation tools, that enable companies to find blind targets under barren cover in historically well endowed regions, or new targets in developing area plays such as the Athabasca basin.
According to Kaiser, there are a number of junior miners that are employing these strategies to good effect. Of course, all such strategies come with the risks that are associated with junior mining investment, but are likely to prove useful in a flat commodity price market.
This article appears courtesy of Mine Web. To read more daily international mining and finance news click here.