One of us has invested in some junior miners, while knowing these outfits can vanish into larger black holes than they will ever create. "Investing" in penny plays is in many ways a crapshoot, so should be done only with spare change. All of the following stocks seem like worthwhile gambles today. None are in the Contra portfolio.
Band-Ore Resources, which sold several years ago above $1, was bought at 15 cents a share. The initial target price at which to sell is 44 cents. The stock is illiquid and hard to buy. The miner has several properties in Northern Ontario and is hopeful about its Thorne gold property. So is Placer Dome Inc., which has agreed to help develop it.
TVI Pacific (TVI-TSX), which has a China gold play, was bought at 6.5 cents a share in 2003. The position was sold at 19 cents before the year ended, above the initial target of 14.5 cents. The stock then skied to 39 cents. Oops. It now trades at about a dime. TVI, after losing a bit of money, is now cash-flow positive, Its first-quarter revenue was $3.2-million, up from less than $1-million a year ago. Potential dilution is a problem, as more than 400 million shares would be outstanding.
South American Gold and Copper (SAG-TSX) is another miner in the big float department. Bought one year ago at 9 cents, with a target of 14.5 cents, the stock has slowly fallen. Revenue from the company's Pimenton project in Chile jumped to almost $1-million during the last quarter. The firm says positive cash flow is close. Rio Tinto PLC is now working with the miner, evaluating copper potential at Pimenton.
Diamond and gold explorer Twin Mining (TWG-TSX), was bought in early 2003 at 33.5 cents a share, with a sell target of 75 cents. The stock has taken a beating since, and is now less than half that. This outfit has diamond potential in two of its claims and gold in Idaho but the problem so far is viability. Last month, a strategic adviser was retained. Consideration is being given to splitting Twin in two, merging or acquiring another company. When commodity prices spurt from lows to highs, shares in junior miners can soar. Patient investors who don't catch either the bottoms or tops can still often see their stocks double. If this happens in seven years or better, that's a minimum return of 10 per cent a year, eminently doable for those able to ignore short-term volatility.
Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter. This column first appeared on GlobeinvestorGOLD.com.