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Gold/Mining/Energy : HAWKEYE GOLD INTERNATIONAL INC. (VSE:HGO)
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To: long-gone who wrote (230)5/30/1997 4:47:00 PM
From: Richnorth   of 472
 
According to some info I have received, before investing in a junior mining company, an investor would do well to consider the following factors:-

1. Management Ask (i) who are the key "players" and their past track record?
(ii) what is the share price history of the stock(s)?
(iii) are there any high-powered individuals
already on board or coming from some major company?

2. Quality of the Property or Deposit

Ask about (i) richness of the ore and feasibility of
extraction;
(ii) cost of extraction;
iii) estimates of reserves i.e. how long will they last

3. Access to Financing

Ask about(i) how is money going to be raised for the mining project(s) from shares?
warrants? options?
issuance of debt? private placements?
joint venture with a "major"?

4. Estimate the value of the stock
First multiply the current share price by the number of shares outstanding. This gives a dollar amount called the market capitalization

Then estimate the company's assets (usually this is the value of cash in the bank plus cash used in developing the property plus 20% of the total value of the company's proven and probable reserves)

If the market capitalization is very much greater than the
company's assets, the stock is dangerously OVERVALUED!!!

Dividing the company's assets by the number of shares outstanding will give us the true asset value per share i.e., what the value of the share price should be if the company was fully valued. If the true asset value per share is far greater than
the current share price, the stock is UNDERVALUED!!! and our investment is most probably a good one. Just the opposite is most likely to be true if the current share price far exceeds the
true asset value per share.

If we go through the above procedure for each stock we invest in, then we are doing the necessary dd, i.e., due diligence, not diamond drilling which is the company's job! And we are not then investing according to hype.

I have written the above for two reasons: to share the info with you and as an exercise to ensure I have got it. However, I will welcome any additions/corrections etc.

Best of luck in your investments.

Richnorth
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