Hello Calafert, Truly another blow to the junior mining sector.
<< It is probably very unpleasant for you and I hope people will understand
that nobody can be 100% sucessfull and the risk is part of the job.>>
Exactly, every pick cannot be a winner and is why the 1st paragragh in my
Speculation newsletter each months reminds you that these selections are
very risky, and for risk capital only. I always suggest my regular RSA
newsletter for those who don't like this much risk.
It is sometimes difficult to protect one self from a well planned scam and
although I have picked out early many of these, nobody is perfect including
myself as you point out
The best protection we have from this sort of thing is proper risk
management. First As you have probably heard many times "diversify". I
believe the best is to buy at least five or six of these junior
exploraion/mining stocks for your portfolio. Eight or ten is preferred and
if you can manage, more is even better.
For example if one diversified into the stocks I recommended among the South
Western Gold Rush or Desert Dirts which included Delgratia, IPM, Maxam Gold,
LS Capital and MG Gold.
IPM is up several 100%, Maxam and Chip we already sold for gains of 100 to
300%. Even as the bad news has come out on Delgratia we are taking profits
of over 100% in MG Gold. As you see a simple diversification into these five
has made up and more for the one bad apple. Your PF would be very happy.
My calls have been extremly profitable or lucky here, I guess a setback was
overdue. I will be very pleased if I can could continue to pick 4 big
winners for every looser.<g>
Recent months we have witnessed total losses or almost total losses in
stocks like BreX, Timbuktu, Cartaway and now posibly Delgratia. These stocks
were scams or way over valued, but be aware these are not the only risks
involved in this sector. Environmental accidents can lead to lawsuits and
bankruptcy, mining accidents as well as falling metal prices or other
conditions that could result in the closure of a companies only mine or major
asset.
Stop loss orders are of little use as quite often these stocks are halted and
open way down in price when trading resumes. A diversified portfolio is your
best risk management tool here. This way one or two bad stocks will not wipe
you out.
The idea behind the diversified portfolio is to make good profits on your
other selections to make up for any losers and obtain over all good gains in
your portfolio. Another good risk management tool is take profits. Selling
half your position at 100% gain works well. This could have been done on any
of the scams mentioned above including Delgratia, since we bought in around
$15. This will eliminate your risk completely.
Beware if buying expensive stocks without reserves or mines. By this I
mean exploration stocks priced at perhaps $4 or higher with market caps of
$50 million or more. These stocks have already got reserves and succesful
exploration finds already priced into them. When you buy at these levels you
are
speculating on more exploration success and the risks are much higher. I am
not saying don't own these, but by the time they reach these levels you
would have already wanted to be taking profits to
manage risk. These stocks can go higher on positive fundamental devlopments
(continued exploration success) but any disapointments can result in a sell
off (Corriente) and the stock may never recover. A good exploration stock
bought at $1.00 may only drop to $0.70 on bad news for a paper loss of 30%
but one bought at $10 could fall to $1 or $3 for a loss of 70% to 90%..
<< So now, is there any residual value in DELGF.
You mentionned that "The downside is well protected by DELGF's diversification
in many other properties and cash on hand. At current prices the market is
putting a value of practically nothing on the Nevada property, so looks
like a very good risk/reward play to me"
So what do you think could be the remaining value of DELGF now ?>>
My prognosis was before the scam came to light. Now there will be a total
lack of market confidence, lawsuits to deal with, perhaps a delisting. I
would not count on anything out of this stock now. It is posible for
Delgratia to get through this but the stock will not go anywhere for years
if at all.
Are you still positive on IPMCF ?
Yes, I am still positive, the fundamentals have not changed. There has been
some fallout because of DELGF, but because there is a scam does not mean
others are. Many people call IPM and other DDs scams or reference them
to scams. This is simply false. These are high risk technology plays.
One is betting that technology will solve the complex minerilization. I
prefer IPM because it has been working on this for years with some of the
best people around. I believe they have solved the technical challenge.
IPM has $$millions in the till and has been working with top consultants,
Behre Dolbear,
now Lycopodium and others previuosly. Scams are next to imposible with these
consultants involved. In fact it is outside consultants that exposed
Delgratia, BreX and other scams. If BreX and DELGF had worked with
independent consultants, including audits they would not be where they are
today.
Ron |
