11/09/2013

Tiny Obscure Illiquid Asset Based DEEP VALUE


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Bear Creek Mining Corp. (BCEKF): is a Canadian silver and gold junior miner. They expanded exploration in Peru. Currently the stock trades for $1.87.The margin of safety is supported by a strong financial position with a book value of 1.44.The 1.44 book value breaks down per share as follows,cash of .63,receivables of .06, net PPE of .86 to give us total assets per share of 1.47. Total liabilities are .033 giving us a book value of 1.44 per share. The stock is down 46% over the prior 52 weeks. Market cap is 179.81M with an enterprise value of 141.85M.


From Motley Fool October 14,2013 Seriously, Silver Reserves for $1
"Bear Creek Mining (NASDAQOTH: BCEKF  ) has a current market value of $215 million with 330 million P+P ounces ; costing roughly $0.65 on a per-ounce basis. Why so cheap? One reason is the Peruvian government stripped them of title to mineral concessions covering the Santa Ana project (63 million P+P) in June 2011. Lately, Peru has not been the most popular mining jurisdiction. But geologically speaking Peru is well endowed, proof being its production: They are the second largest silver producing country after Mexico. Should sentiment toward Peruvian mining improve in the future, Bear Creek ought to be ready to go "
Posted on Seeking Alpha Pro,July 2013 Bear Creek Mining Has Enormous Upside Potential

“Bear Creek Mining is a silver exploration and development company with properties located in Peru. Currently the company has a market capitalization of roughly $150 million.
Given the high amount of resources on the company's properties, particularly on its Santa Ana and its Corani properties, this is an incredibly low valuation. If the company's cash ($63 million as of the end of March) is backed out, then investors are currently valuing the silver on these two properties at less than $0.25 per ounce.The reason for this is that there is a high risk that the...”

Scorpio Mining Corp. (SMNPF) : is a silver producer operating in Mexico with significant base metal by-product credits.
Financially strong with a large margin of safety that like most miners have been impacted by lower Sliver and metal prices. 

Current price is .21 with a .72 per share book value. The book value is comprised of per share value of cash at .13, Receivables .03, Net PPE .48 to give us total assets of .75, total liabilities of .027 to give us a book value of .72

52 week change is -73%.


Karnalyte Resources Inc. (KRLTF): “Karnalyte Resources Inc. engages in the exploration and development of agricultural and industrial potash, and magnesium products. It focuses on developing and extracting a carnallite-sylvite mineral deposit. The company owns a 100% interest in subsurface Permit KP 360A comprising 68,301 acres; and subsurface mineral lease KLSA-010 consisting of 16,825 acres located near Wynyard, Saskatchewan. Karnalyte Resources Inc. was incorporated in 2007 and is headquartered in Okotoks, Canada.”Yahoo

Total Cash : 57.30M , Total Cash Per Share: 2.09
Current Ratio:28.58 , Book Value Per Share:4.18
52-Week Change: -80.58% ,
52-Week High(Jan 14,2013):8.81 ,52-Week Low Nov 7, 2013:1.47
Market Cap: 39.35M , Enterprise Value:  -14.71M
Price/Book :   0.35


Related articles Seeking Alpha April 26, 2013


What makes the story interesting is not the negative enterprise value, large discount to book value, owned land permits. Its that in January 2013  Gujarat State Fertilisers ; Chemicals purchased a 20 percent stake in Karnalyte Resources 

"Gujarat State Fertilisers & Chemicals to buy 20 per cent stake in Canada's Karnalyte (KRLTF)". The price for that stake was 45 million or 8.15 per share. Press Release


Exeter Resource Corp (XRA):


"Exeter Resource Corporation engages in the acquisition, exploration, and development of mineral resource properties in Chile and Mexico. The company primarily explores for gold, copper, and silver deposits. It principally holds a 100% interest in the Caspiche gold-copper project located in the central Chilean Andes of Northern Chile. Exeter Resource Corporation was founded in 1984 and is headquartered in Vancouver, Canada." Yahoo



A few quotes from the article
"My two current favorites, which I own personally and in the fund I manage, are Exeter Resources (XRA) and Almaden Minerals (AAU)" "Interestingly, the CEOs of both XRA and AAU told me that most of their one-on-one investor meetings were with analysts and portfolio managers of large macro-oriented investment funds. This is the first time in 13 years of my involvement in this sector that I have heard about "generalist" funds looking at mining shares and it reinforces my confidence in my outlook for the sector." "Both stocks are incredibly undervalued relative to their proved gold/silver deposits and I expect that both will be acquired by large mining companies sometime in the next 18-24 months."

Market Cap: 66.31M ,Enterprise Value:14.80M
Total Cash: 46.20M
Total Cash Per Share:0.52
Current Ratio:89.98 ,Book Value Per Share:   0.52
52-Week Change: -50.00%             

Chuck Royce reported small additional purchases of shares for the quarterly period 06/31/13


Phoscan Chemical Corp (PCCLF): "engages in acquiring, exploring, and developing mineral and natural resource properties in Canada. It holds a 100% interest in the Martison Phosphate project, which is located towards north of Hearst, Ontario." Source Yahoo
Why does it look interesting?

Comments posted 9/06/13;
Current price is .25 (09/06/13) with a NCAV of just .26. Yes it's selling for slightly less than it's NCAV. (Net current asset value (Net Current Asset Value (NCAV) = Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) - total liabilities) = .26

Book value is .85 or P/B of just .30.

Optimistic insider activity was reported during 2013. 67,000 shares purchased in July 2013 for .26, 70,000 during April 2013 for .25, 56,000 in March for .26

PCCLF has a negative enterprise value of -17.86M, market cap value of 41.78M and posted a 52 week change of-negative 12%
I consider this a major company positive as they executed aggressive company share repurchases. The outstanding share count of 172.18M and has been reduced to the current balance of 163.69M.

Value Institutions with a longer term investment style have positions, Royce, Mackenzie Canadian Resource among others at much higher prices.

Purchased a small position in PCCLF,KRLTF,XRA as illiquid hence speculative

2 comments:

jeff said...

Never thought I'd see you buying mining companies.

ShadowStock said...

Hello Jeff

PCCLF has been aggressively buying back shares below NCAV. The net cash value is near the share price, strong 2013 insider buying, selling at 30% of book value, owns 100% interest in the Martison Phosphate project.

KRLTF, I was buying on Friday selling below net cash. Large publicly held Indian Gujarat State Fertilisers (GSFC) paid 8.10 per share for 20% interest January 2013.They have some knowledge of KRLTF properties and paid 8.10 per share. I'm only paying below net cash.

“There Are No Bad Assets Just Bad Prices”, :).

Hope all is well . I see you’re now on a board, SYTE. If only I knew I would have never sold my shares.

http://finance.yahoo.com/news/sitestar-announces-appointment-board-member-154641526.html