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Analyzing A Junior Mining Company

February 26, 2016

Imagine buying the house next door for half price, would you? Junior mining stocks have been on a fire sale for some time now but why are we nervous about pulling the trigger and buying? Why doesn’t  the colloquial statement ring true? “Buy low and sell high.” It makes sense, but then why do most of us buy high and sell low? Fear and panic sets in when we see our stock prices collapse. It seems counterintuitive but buying when people are panic selling generally leads to profitability.

My PhD thesis focused on the affective heuristics of the 2008 stock market crash. Basically that investors are emotional beings that invest emotionally – both in times of highs and lows in the market. Like many, I sustained a lot of personal losses and am starting to become more aware of my ‘emotional investing patterns.’ When do I invest? What makes me motivated to buy a certain stock? Am I panic buying/selling? Have I done my research?

Being a newsletter writer, I have ‘learned’ to do more investigation on the companies I write than I would if I invested purely for myself. But in saying that, it is prudent for the investor to perform in-depth research before buying a stock. In the junior mining field that includes:

1. Having an in-depth knowledge of the history of the management team. This is probably the one most crucial aspect. If the team has a track record of success, chances are they will continue in that course. I urge investors to call the President of the junior mining company, not just the Investor Relations rep.  If he/she is too busy to talk to you then they do not deserve your investment. Ask him/her about the project, company goals, finances etc. Get a ‘feel’ of the company from its leader.

2. Know the project/property well. If there are any drill results, analyze them.  Talk to an independent geologist and get an opinion on the project and surrounding property.

3. Analyze the balance sheet – is there debt, why? How much cash is on hand? Will there be another financing needed?

4. If the company is going into production, what are the start-up costs?  Can they sustain it? How long is the mine life? What will be the projected net revenue?

And importantly, have an exit plan and stick with it whether the company’s stock falls or rises…once that goal has been realized, take your profit or minimize your losses. Do you due diligence so you won’t have to suffer from buyer’s remorse.

With all of this to consider, please visit our site at and sign up for your FREE newsletter and stay informed in the junior mining space.


email: [email protected]

Kal Kotecha, PhD, is the editor and founder of the Junior Gold Report, a publication about small cap mining stocks that is read and enjoyed by thousands of investors. He was the editor and creator of the Moly/Gold Report, which focused on critical analyses and open journalism of companies profiting from the precious and base metals sector. The scope of his current activities include worldwide onsite analyses and reporting of developing companies. Kal has previously held leadership positions with many junior mining companies. After completing his MBA in Finance in 2007, Kal completed his PhD in Business Administration in January 2016. His thesis was on the Affective Heuristics of the 2008 stock market crash. He also lectures Economics at the University of Waterloo and Niagara College where he was voted Professor of the Year 2013/2014. Contact: [email protected]

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