Low P/E, dividend paying JUNIOR miners?

[DTEJD1997]

Hey all:

 

Anybody else looking at the junior miners?  I generally don't like mining companies, but these are odd times for the industry.

 

As long metals prices don't go down too much further, there could be a lot of opportunity here.

 

What is interesting is that a lot of the "majors" are LOSING money at these price levels.  They have high costs and some marginal deposits.  Some of the mines/projects are being mothballed or put on the back burner.  There are several juniors that are still solidly profitable at $1,200 gold, $20 silver, and $3.25 copper.  I'm finding juniors with P/E's of 5,6,7...

 

I was also surprised at the debt levels that some of the majors are carrying.  There are several juniors that have NO debt and in fact have substantial amounts of cash on the balance sheet.  Some of these juniors are also trading at a substantial discount to book value.

 

Finally, and perhaps most importantly, some of the juniors have ALL of the above characteristics and are paying substantial dividends.  I'm finding several with dividends of 5 or 6 percent, sometimes even higher.

 

One problem is that some of the juniors will have 1, 2, or maybe 3 producing mines, and thus have concentrated risk.  Why buy a major that has some turkey operations, when you can buy a variety of juniors that all have good operations.

 

There is also some serious political risk too, but once again, I think this can be reduced by buying a basket of companies with operations in different jurisdictions.

 

Anybody else thinking along these lines?

[ItsAValueTrap]

There's a lot of fraud (inflated technical reports, aggressive accounting) and corporate waste going on in the junior world.  It's not a good place to look for longs.

 

The assets are extremely difficult to analyze.  You pretty much aren't doing your due diligence unless you have a tech of specialized engineers and access to data (and the property).

The other way is to identify people with integrity, verify it, and to take their word.  Unfortuantely, very few people in the junior mining world have integrity.  Just look at all of the people who pay the shill website theaureport.com

[DTEJD1997]

There's a lot of fraud (inflated technical reports, aggressive accounting) and corporate waste going on in the junior world.  It's not a good place to look for longs.

 

The assets are extremely difficult to analyze.  You pretty much aren't doing your due diligence unless you have a tech of specialized engineers and access to data (and the property).

 

Hmmm....yes, I've heard there is a lot of fraud, but isn't that mainly in the companies that are not actually producing?

 

Am I wrong in the assumption that if a miner says we mined XXX ounces and had revenue of say $100MM and have X amount in the bank, wouldn't that be audited annually?

 

I know there have been blowouts (BRE-X?)  but if a company is producing and has reported earnings and is paying dividends, wouldn't that reduce the chance of fraud?

 

 

[Guest wellmont]

There's a lot of fraud (inflated technical reports, aggressive accounting) and corporate waste going on in the junior world.  It's not a good place to look for longs.

 

The assets are extremely difficult to analyze.  You pretty much aren't doing your due diligence unless you have a tech of specialized engineers and access to data (and the property).

The other way is to identify people with integrity, verify it, and to take their word.  Unfortuantely, very few people in the junior mining world have integrity.  Just look at all of the people who pay the shill website theaureport.com

 

who are some of the reputable people? thanks. what do you think of Brent Cook?

[Green King]

Don't think such a things exists in the real world in real  numbers. I think I recalled seeing two in the tsx and even those looked looked crappy.

[ItsAValueTrap]

There's a lot of fraud (inflated technical reports, aggressive accounting) and corporate waste going on in the junior world.  It's not a good place to look for longs.

 

The assets are extremely difficult to analyze.  You pretty much aren't doing your due diligence unless you have a tech of specialized engineers and access to data (and the property).

 

Hmmm....yes, I've heard there is a lot of fraud, but isn't that mainly in the companies that are not actually producing?

 

Am I wrong in the assumption that if a miner says we mined XXX ounces and had revenue of say $100MM and have X amount in the bank, wouldn't that be audited annually?

 

I know there have been blowouts (BRE-X?)  but if a company is producing and has reported earnings and is paying dividends, wouldn't that reduce the chance of fraud?

 

The problem is that it's about what these companies will make in the future.  While there is less risk in producing miners, they may overstate future production and how long the reserves will last.

 

There are also a lot of flawed properties out there.  There is some problem with the property that most investors aren't wise enough to figure out, e.g. political risk.  The more obvious flaws result in negative cash flows; these mines should be put on care and maintenance but insiders will run the company into the ground anyways because they are there to collect a paycheque and to sell a dream.

 

who are some of the reputable people?

 

People I would trust:

Altius / Brian Dalton.

Teck / Norman Keevil.  Keevil doesn't run Teck anymore though.

 

Brent Cook seems fine (and certainly far better than the investment banking analysts).  He runs a newsletter though, so that means that he more or less has to make long recommendations.  I'm not sure if going long exploration stocks is the best idea in the world.  You might be much better off if you had never even heard of mining in the first place.

He made some good calls on not buying Pretium and in staying away from hard rock lithium.  I don't read his newsletter.