BuffetJr

Hi Dr I would reccomend my broker, but not the firm itself (if that makes any sense). More than happy to take emails from people who are interested. BuffetJr

Hi Tom I agree with the Doc regarding getting a good broker. Re Commissions, i used to use an online broker with very cheap rates. My broker has about 6 times the rate, but i find that he is able to time my entries better (since he is watching the screen) and often the savings there more than offset the higher brokerage rate. And if you are going to play junior miners...you need a broker that: - has main focus on that sector, and has been for a while (5+ years at least imo) - does not recommend house stocks (unless they actually are good) - is versatile and can look at other sectors (for example, jnr sector in Australia is full of cr@p at the moment and is stagnating, with some junior goldies going to the wall...so need to be able to think outside just the mining sector) I would strongly recommend my broker but he is in Australia and only plays the Aussie sharemarket. Regarding funds, I find the listed ones are the best, rather than going towardsa 'real' investment manager. Companies (on the ASX) like Heemskirk, Lion Selection Group and so forth have all done quite well. Don't invest in them myself though i did have Lion Selection for a while many years ago. Regarding playing the junior market, if your a trader, then i cant comment...but if your an investor, see my detailed post above. Its all about research. BuffetJr

I agree Guest, which is why i am unwilling to invest in a 'pure' uranium play...and by that i mean, stocks that are just there for the uranium boom and which will disappear or change their focus once that ends. Uranium companies that have real assets with potential are another story, particularly if you can find an undervalued one with a high grade resource (high grade for me would be 0.2% or higher, not these cr@p deposits of 0.1% or less). Obviously this has been to my detriment given how some of the stocks have jumped so high. But that wont always be the case. BuffetJr

How I play uranium... This may be particular to Australia only, not sure if there are companies like this overseas. Basically I'm not a great believer in the uranium story, but i do want to retain exposure to it. So my method is to buy companies that spin off uranium prospects in to other ocmpanies they are listing. If I'm lucky I also get stock in the spin off which i then sell into the stag (the jump on listing date). Meanwhile I retain my investment in the original company which is looking for other stuff (base metals, gold etc). The reason i do this is that for some bizarre reason, it takes a while for the market to cotton on to the fact that the original company now has a significant asset (the shares in the spinoff) that makes it extremely undervalued (specially after the uranium spinoff shareprice goes nuts). As an old example, i did this with a company called Jindalee Resources which spun off a uranium IPO called Energy Metals. They retained around 10 mill shares in EME which was valued at around 4 mill pre list....with a market cap of only around 8-10 mill for JRL this made it etremely undervalued given its cash assets and exploration projects. EME then went on to stag at about 4 times the SP, JRL didnt really respond, so i bought up more...eventually the market took notice of JRL and it went ballistic. Mind you i stupidly sold the EME shares at 98c on day 1 of listing...think they are around 3-4 bucks now. I am currently doing the same with a company called Washington Resources which i bought recently in the low 20c as well as options at 5c last couple days. It has spun off a uranium company called Northern uranium at 20c, with the SP now at 64c 9went for a run yesterday), 10 mill shares in it values it at $6.5M, WRL also have 3 mill cash in the bank and some very good nickel and copper exploration projects. With a market cap around $12-14 million, it looks quite cheap. Market is starting to recognise it, and WRL now moved up to around 28-29c...if NTU keep going then I get the uranium upside plus explosure to some good quality exploration projects. Not sure if this is a trend overseas, but if it is i think its definitely worth investigating such companies while the uranium boom is in full swing. Take a look at their holding in the uranium companies, the qualiy of their own exploration assets and cash in the bank, then take a look at their market cap to see if the market has recognised the potential yet. The downside is limited while the upside is twofold, uranium boom and exploration. Cheers BuffetJr

On the topic of good reads, suggest keeping an eye out for a book (not yet written) by my stockbroker, a west Aussie. His focus is almost purely small junior Aussie miners, and his book will I expect be a cracker of a read, both in terms of picking junior miners and well as his very sharp humour (his daily morning email to clients is often a reason to get out of bed in the morning alone). Unfortunately I am not sure when that book will be finalised but am waiting with anticipation. His previous book, 'The Green Room', was more targetted at the novice investor, but this one should be much more hardcore...but not from a geologic point of view. Just from a 'market savvy' perspective. The 'Green Room' I believe is the barrel of a surfing wave...the trick is to come out the other side still on your board...quite an appropriate analogy for the investor in the small end of the market! On the topic of 'secrets' of investing in junior miners, here are my key criteria...they are not 'secrets'...just common sense criteria that I personally apply...those that read my Royalco post will have some of these already, but i go into a little more detail here, without the focus on a particular company. I should note that it is rare for many of my investments to fulfil all criteria, since such companies are quite rare, or at least hard to pick out of so much rabble out there at the moment...it was much easier a few years ago when metal prices were in the doldrums...however they are good barometers for picking my investments and generelly the company needs to meet most of them before i touch it. Note, one i dont cover here is project quality because honestly, that is so obvious a requirement that it doesnt need to be mentioned. 1. Management quality This is crucial when investing in a junior miner. I mean...a junior miner is a RISK immediately simply by the fact that its a 'junior miner' so the last thing you want his a risk being managed by a bunch of twits. Although i said that some of my investments do not meet all criteria...this is a mandatory one. Problem is that quality of management is very much a subjective thing...and hard to quantify. Firstly we need to look at whether the management experience is what is required for the stage of the company. An explorer should have management with a heavy 'scientific' focus preferably including both 'technical' (ie experiences with technology) and 'boot strapping' (ie good at on the ground work...eg a hard core geologist and a geophysicist. Explorers should also ideally have small boards, for example id be happy with a geologist, geophysicist and a finance guru. Lawyers are not really required at this point in time, unless the explorer is focussed on acquiring 'marginal' tenements. When a company has a deposit ready for development, it should be readjusting its board to a development focus, ie a mining engineer might replace the geophysicist or geologist. And someone experienced at marketing mining output. Secondly you need to quantify each of these person's experience...are they the real deal, or a bit green behind the ears, or just a shambles looking to make a quick buck? This involves often getting your hands dirty by looking at their track record, ringing up your contacts (whoever they may be) to see if they've heard of this person and their opinion etc. Association memberships may also provide a key clue, for example a AUSIMM director is often a sign of a well credentialled person. 2. Early Cashflow if not already / tight capital structure My favourite type of junior miner is one which has both this criteria, and the quality management criteria ticked. The problem with most junior miners is that they are costly to run and money is not easy to come by, particularly those in exploration phase. One could argue that money is a lot more easy to come by in these boom times, but is that a good thing??? Many companies know they can raise capital...so are they being TIGHT and CAREFUL with the cash they have now...ie are they making sure that one drill hole is being used in the right place, rather than 2 simply cos they know they can 'get the cash' when needed. Too often i see explorers squandering cash on exploration holes that probably were not needed. This is partiularly galling now when mining costs are so high. By cashflow though i am not referring to raising capital. I am referring to REVENUE. If a junior miner has a potential source of cashflow to fund its other eploration or development projects, that is a BIG tick in my book, becuase it minimises the need for capital raisings. Cashflow could come from a small mining project that although of minute size, will throw out some decent cash...or from royalties, or from joint venturing into a producing project. Or cashflow could be imminent from again a project that has been on the companies books but just needs a few more ticks eg a feasibility study. If you can see cash on the horizon then hopefully you have a company that will be able to control its capital structure while continuing to look for the company making projects. A tight capital structure is almost a mandatory requirement in my books (though i will make exceptions where there is obvious value). 3. Converyor belt strategy I took this phrase from a presentation by a ASX company i recently witnessed (Icon Resources)...which i think adequately describes one of my criteria, that is, to use and abuse a project as quickly as possible. So often i see companies hanging onto a project forever, even though initial results were not promising. This is often the sign of a company with poor management or poor projects, ie they have no idea what to do next if they dont keep this one, or they have nothing to move onto or no idea how to find a new project. Of course that dud project then becomes a cash drain. So a conveyor belt strategy entails quick turnover of esxploration projects...ie poor results mean its flicked off or JVed, while the good stuff is kept for more detailed exploration. 4. Existing resources Generally my portfolio is mostly made up of companies that have a twin exploration/development focus, that is, they have a resource that they are in feasibility studies or in the process of commissionning, while also being a explorer. Preferably the existing resource should have extension potential...so that exploration money can be thrown both at high risk projects as well as near-resource areas where the likelihood of good drill results is high, and so a shareprice catalyst. My post on Copperstrike is a good example of a company that meets this criteria. This used to be a mandatory criteria for me, however due to high metal prices, many of these companies are often highly priced and it is hard to find value, so i have made exceptions where i do find a quality exploration company even without a resource. 5. Makeup of investor base I try to stick to companies whose investor base are boring people that simply buy and hold...(and hold etc). The last thing i want is to be in a company that is chockers with traders. Companies with a high proportion of loyal shareholders will generally find a great audience for shareholder issues (such as rights issues) without the usual risk of a large selloff just after the ex date...since of course a large loyal shareholder base means its hard for traders to get their piece. It helps to have large cornerstone institution/company investors on board as well. IT is often useful to become familiar with large shareholders that appear on many companies registers and who stay there...seeing these people on a register with their 5-10% holding is always comforting. 6. Grade is king...but not in the way you might expect You've probably heard the phrase 'grade is king' and the speaker is usually implying that the higher the grade the better. I do believe in the phrase, but not in this way. A low-medium grade project can be a great investment...and in fact can often be a better investment than a high grade one, due to LEVERAGE! It was pleasing to see a seminar recently be Dr Allan Trench where he basically also said the same thing though his angle was more that low grade resources have greater leverage to metal prices due to higher costs which i sort of agree with. A high grade project may have already been factored into the price, whereas a low-mid grade project, although feasible, may not attract investors until the economics are confirmed, or indeed until production starts. An example of this occurred today with an ASX listed company called Intec. I bought this a couple of months ago for around 12-14c due to the fact that they had stated they would be producing zinc concentrate (zinc, lead, silver) by Nov/Dec...the price had been pretty low for some time, because the resource ran at only 2.8% zinc. However, it had recently been JVed with Polymetals, a privately run company with strong production experience..and I immediately recognised that if they were involved, then most likely it was going to happen as stated (Poly doesn't get involved with marginal projects). The price slowly moved up but nothing spectacular, even though several announcements stated everything was on track, including wet commissioning of the plant. In fact you could say the price rise was primarily due to the increasing zinc price, rather than progress at the project. By today, the SP was at 23c at open (though it had happened so slowly)...then the ann came out confirming first production...the market went bananas with over 50 mill shares traded (around 10% of total shares on issue) and a price increase of 5.5c. In other words, a low grade project has been fairly much ignored by the market until the very last possible minute. I'm not saying high grade projects aren't great to invest in...but do not discount low-mid grade projects where the grade is at least sufficient for the type of project it is. 7. Broker likes it This will only apply if you use a full service broker that specialises in the sector and doesnt just focus on house stocks. If so, then if you trust the persons experience, its a pretty good idea to get them to have a look at it. Again my broker is a great asset in that regard because even if he doesnt have the technical know how or hasnt looked at the company, he knows people that have and can get an opinion. I am proud to say that in one case, one of my stocks appeared on my brokers recco list after i pushed him for an opinion...and its provided around 400% return to his clients. My broker has also been around the traps quite a while to know many of the usual suspects who appear on boards of ASX listed companies, and so is a great source of opinion on that subject. 8. Active schedule of exploration/development This is probably a minor criteria for me as I often invest for long term. However it does help where a junior miner is in a period of intense activity, be it drilling or development. At other times, the market can quite often get bored and the price drifts sideways or gives up gains during that intense activity. Quarterly reports where they provide a summary of work planned for the next quarter are a great indicator of the likely level of intensity for a company in the near future. Quarterly reports are unfortuantely to often ignored by investors these days...not sure how they work in US, Canada, etc, but in Australia they provide great information from my point of view. I like to get set in a company before these periods of intense activity start...because often this can mean a decent price rise...and the smart company may also raise cash when it thinks its price has peaked...ie higher price, means less shares, = less dilution for me! 9. Monitor your investment closely I have a policy that as soon as the wind changes, i jumo out of a company ASAP. By this i mean, as soon as something occurs that causes me to second guess my investment, i will jump ship. This can often cause painful hindsight episodes where the decision to exit was wrong, but on the other hand, it can also avoid sleepless nights. I also take no prisoners when i find another company that I believe may provide a better return than one i already own. Sometimes i dont follow this diligently, and often regret staying in an investment too long, where i could see things were not as they should be. That actually happened once very recently, where a stock I had held for almost 2 years, and which had around 400% return, looked wrong to me, but i didnt act. I was lucky to exit at my average entry price, as i refused to heed the danger signs...(which included the fact taht the shareprice was gradually retreating). The above are probably the most important criteria (And approaches i guess) i use...there are probly several others i could talk about, for example, access to infrastructure etc, but i think the above are a good starting point for anyone looking at investing in junior miners. Note the above has come from around 10 years experience, and it did not come easy, not with many heartaches along the way. Hope some of you find this useful. BuffetJr