Green Spots on a Red Day

Canada gold, junior mining companies

The Dow is crashing, well, actually, correcting. Bitcoin is under $7000 as I write.

The consensus seems to be that the Dow is a pretty normal market correction after months of steady rises. There is no such soft soap for Bitcoin simply because it is pretty much impossible to make a case for any particular value for Bitcoin. With the companies which make up the Dow you can point to actual revenue and profits and, in some cases, dividends. With Bitcoin you are reduced to speculation about the risk appetite of Korean housewives, the willingness of governments to put up with crypto currencies and whether or not Millenials have any room left on their Visa cards.

On down days it is often a good idea to look at companies with solid fundamentals. I talk to a lot of CEOs and one of the questions I am always interested in is what their business model actually is. for some of the explorers, the model is all about developing a project to the point where a larger company will step in and buy the asset. But there are other juniors which are, in fact, mining a resource or very close to mining.

Here are a couple to watch: Ascendant Resources (T.ASND) runs a zinc mine in Honduras. The price of zinc is steadily rising and the world’s inventory of zinc and zinc miners is steadily shrinking. Ascendant has just achieved free cash flow, is exploring for more zinc and continues to improve the efficiency of its mining operations. I interviewed Chris Buncic a couple of weeks ago and you can go a bit deeper here.

I am just waiting on the final version of an article about Rye Patch Gold (V.RPM) which announced that it had attained commercial gold production in December 2017. Here is a small gold producer which is very close to generating free cash flow and has a very solid balance sheet. Analysts see it trading up from its current $1.25 to over $3.00 in the next 22 to 24 months.

Looking for junior mining companies in safe mining jurisdictions which are generating free cash flow or are about to is not the sexiest investment strategy but it offers the prospect of decent returns with very little downside. Compared to the frothy Dow or the Bitcoin bubble, well managed junior miners are a hugely attractive investment.

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