Got this in my email yesterday.... For what it is worth.
Why Junior Gold Stocks Are Still the Place to Be: Edward Karr
Source: Brian Sylvester of The Gold Report (8/6/12)
Edward Karr, CEO of Geneva-based RAMPartners, favors a disciplined, patient and steady approach to investing in junior gold mining companies.
.....Segment of interview….
TGR: How does RAMPartners, which is a Swiss-based investment management and investment banking firm, become interested in tiny mining equities operating in North America?
EK: The usual way. We get lots of research reports. We get brokers that call us. We do our own analysis. We're constantly out there looking at different ideas, talking to people within the industry, attending trade shows and presentations, etc. We also go on site visits to see the projects themselves. For instance, I was recently in Nevada visiting several companies and seeing their operations.
TGR: Overall, are you still accumulating in this environment? Are you still buying junior mining and junior mining explorer equities?
EK: 100% yes. Everything out there today really looks very, very attractive. This is a fantastic time to accumulate. This is also why in this industry, with its volatility, you always need a pretty high reserve of cash so you can go in and accumulate. One factor that a lot of people in this industry seem to overlook is the potential for declining energy prices in the future. The United States is currently undergoing an energy revolution. More and more oil and gas production is coming on-line due to the unconventional shales. My view is that energy prices are going to continue to fall and we could see crude back to $50 a barrel (bbl). But, for the reasons we've discussed before, I believe that gold will continue to hold firm at around $1,500/oz or higher and oil will go down to $50/bbl, making gold mining companies a good opportunity.
TGR: Gas and diesel are two of the big input costs of the junior miners.
EK: Yes, they are huge.
TGR: You have management teams from different small-cap resource companies coming into your office and pitching you on investing in their companies. What are some things you look for?
EK: First, everything in life is run by human beings. You've got to understand the management; I like to see people who are positive and passionate about what they do. I also like to see management with experience in the industry and a good track record. Finally, I like to see a management team that has invested its own money into the company. I like to see management have a very big equity stake in the company. These are all junior companies so I don't want to see management that is taking large cash salaries and having very high travel expenses and other things like that. Let them put the money in the ground.
TGR: How has your approach changed since 2007, a period in which we've been in and out of a recessionary economic environment?
EK: We're not doing as many deals as we did in the past. During a big bull market, the rising tide lifts all boats. And with a big commodity super cycle, investors could invest in a lot of different companies and most likely the market would bail them out. That's just not the case anymore. We do a lot of research. We really get to know the management teams. We do onsite visits to most of the deals that we're involved in. We do fewer deals but have bigger positions and know the companies intimately.
TGR: Do you believe this is something you're going to continue once the sector picks up again?
EK: We're very opportunistic; if we see the whole sector picking up, if we really start to see investors deploying capital and we think it is sustainable through an economic recovery, then we might start deploying some more cash. Obviously, we'd be looking at other opportunities at that point. But for now, we're going through a very, very challenging time both in the financial markets and in the junior side of the gold companies and explorers. That means that we have to keep some cash reserves out there in case any of our portfolio companies, for whatever reason, might need some money.
TGR: Are you getting more favorable terms from these junior companies?
EK: Without a doubt. Today, if you're an institution that actually has cash and has liquidity and is still writing checks and funding into the junior space, you can almost dictate the terms of your deals these days. That wasn't the case three or four years ago. But, you have to make sure that you use prudence and caution, don't overleverage and keep a lot of cash reserves because the juniors might come back to you for another round of financing.
TGR: What advice would you give to an investor today seeking a private placement in a mining exploration company?
EK: The most important thing is to do your homework. In this sector there could be a lot of lottery tickets but you should not approach this as a lottery. There are thousands of junior mining companies out there and this is not an easy sector in which to invest. Lots of companies are not going to make it. You've got to make sure the company has solid management, a solid project and enough financing to execute. Then you look at the stock and its chart. See if you can get in at a very reasonable valuation. And, continue to know everything about that company.
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Explor Resources Inc. (TSX-V: EXS, OTCQX: EXSFF, Frankfurt: E1H)
“Defining the Elephant” at Timmins Porcupine West Gold Project
Explor is confidently targeting 3 million ounces of gold by the end of 2013 & that would represent only 10% of the Timmins Porcupine West deposit potential.
EXS has affirmed the model at Timmins Porcupine West and is growing fast; the current gold resource is 212,800 oz Indicated & 814,800 oz Inferred, by the end of 2012 we forecast to be advanced to 1.5 million ounces gold, and by the end of 2013 advanced to 3 million ounces of gold.
§ - Stable, mining-friendly regions.
§ - Experienced management & skilled technical leadership.
§ - Timmins Porcupines West gold deposit, Ontario, current resource 212, 800 oz (1,371,000 tonnes at 4.84 g/t Au) Indicated +814,8000 oz (7,122,000 tonnes at 3.56 g/t Au) Inferred.
§ - 2 km long gold mineralized strike open on both ends and at depth with proven exploration model clearly indicating gold to be found double the depth currently established.
§ - Total 95,000 meters of diamond drilling completed by Explor Resources to date.
§ - 45,000m of drilling on the south limb in 2012 is expected to take the high grade resource to 1.5 million oz gold by the end of the year.
AI
