North Bay Resources Inc (NBRI)

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investor needs to consider when investing in junior gold mining companies is the level of the firm’s debt. Long term debt in the form of convertible debentures, can be a fast lane to bankruptcy court if the firm has no immediate cash flow. Frequently these debenture holders want to drive the share price down so they can convert into greater amounts of equity and this can send the company’s shares into what’s known as a “death spiral.” This set of circumstances is a common outcome among the juniors that are constantly strapped for cash.

Most juniors an investor will encounter are not in a strong cash position, which represents opportunity when investing in junior gold mining companies. Investors need to determine if the firm has enough cash on hand to sustain minimum levels of operation when investing in junior gold mining companies. This leads us back to our first point – look first to the experience and track record of the management team when investing in junior gold mining companies. If they pass muster then additional work and time spent on other aspects of the firm’s business is probably justified.