Next on the list: Ratel Gold RTL.T

Ratel Gold listed on the TSX is another of my latest acquisition at $0.35/share. Once again I was caught by a news release stating that a significant shareholder had increased their holdings to 18.2%. What does this investor know that I don't?

First thing I always check is the chart and it has shown a very short trading pattern. I figured that this must be a new issue.

Ratel Gold had an initial public offering in August. CGA Mining (CGA.T) a gold producing company had spun off its non core exploration properties into this new entity. The initial IPO raised $14,000,000 at 20 cents a share. A perfect start for a junior exploration play with upside potential. An an added bonus is is CGA Mining owns 20% of the outstanding shares of Ratel

Ratel's home run property is an option to earn a  51% interest in the Segilola property in Nigeria, touted as "the largest undeveloped gold resource identified in Nigeria." Ratel also has a 51% interest in the Mkushi Copper Project in Zambia. One more gold property is under option in Ghana that is in proximity to a larger gold producer.

Further due diligence on Ratel revealed that cross management is in place from CGA Mining. At the helm is Mark Savage is the Chairman of Ratel and also serves as the Chairman of CGA Mining.  Michael Carrick is also on board as a director, he is also President and CEO of CGA Mining. These two should have their best interest at heart with maturing Ratel.

To recap my decision to buy a position in Ratel Gold are as follows:

Competent management with the ability to raise money, 5 substantial shareholders that cumulatively own  58.8% of the outstanding shares, a new issue with relatively low distribution from original shareholders, advanced properties with proven results. Although the geopolitical  region has some adverse risk associated with it, Ratel has properties in areas that have produced elephant deposit type properties in the past.

Currently my position in Ratel is small but I will add to my position when the opportunity arises.

Putting principles into action: Emgold Mining Corporation EMR.V

With the rules and principles that I try to abide by, I came across Emgold Mining Corporation (EMR.V) yesterday. I did manage to buy 5000 shares at an average of $0.21/share.

The first thing that caught my eye on this one is a notice of Pinetree Capital owning a 18.4% share of the company on a fully diluted basis. Why are these guys in for so much? The other thing I check is the chart and it seems to be at the bottom of a cycle.

 

The second thing that was of interest is they have the rights to a past producing gold mine in California. Upon further due diligence Frank Lang of Aurizon and Hemlo fame owns approximately 25% of the company on a fully diluted basis. Between the two groups that is over 43% ownership fully diluted.

Emgold is not a new story, this group has been working on their Idaho-Maryland project for years. Subsequently this stock was heavily diluted in the past and the money spent trying to further this project. It went through a recapitalization process resulting in a 10:1 rollback of the shares. This has pretty much wiped out all former shareholders. Concurrently it has repriced all warrants and options way over current market price. Buying the stock at $0.21/share today is like buying the old shares at 2.1 cents.

The company has effectively reduced it debt and recapitalized the coffers at $0.14/share with a four month hold. The only further dilution is up at $0.35/share where the strike price of the warrants are. These warrants probably won't get exercised until the stock price is at least $0.40/share.

So it looks like the pieces are in place for some upside potential on this one. I have taken a small position in this play to keep me interested in its progression. There could be a chance to acquire a larger position at or below $0.20/share come December tax loss season.

Just to recap my purchase decision we have in place proven management, recapitalization, a gold story in a favorable jurisdiction, large insider ownership and a stock price near the all time lows.

Let the cycle begin.

12 essential junior investment rules to follow

To be successful at making money from junior resource stocks you need dicipline. This requires rules that you must follow religiously.

Rule #1: Do not be emotionally connected to your money. Your money has no emotions so neither should you. If you can master this you will find that you don't get the high from a stock that is rising and the lows from a stock that is in a losing position.

Rule #2: You can always buy a stock, but you can't always sell. This being said never hesitate to take some winnings off the table when they are presented to you. There is an old saying that goes" if you found twenty dollars on the ground would you leave it there anticipating that there will be sixty dollars around the corner."
Do not forget there is only one reason to buy a stock and a million reasons to sell it.

Rule #3: Never fall in love with a stock. It will drain your savings and break your heart.

Rule #4: Talk is cheap. Stock promoters always talk a story, that's their job. Always discount what they say. If they tell you the stock is going from 10 cents to a dollar, it probably won't get past forty cents.

Rule #5: Stay clear of the Over The Counter and the Pink Sheets in the USA. Most unscrupulous stock promoters that once operated on the VSE have moved their practice to these exchanges. Anyone that gives me a OTC stock tip, I usually stop them mid pitch and tell them I am not interested.

Rule #6: Plan your trade and trade your plan. Study the stock charts and buy when people have lost interest or selling for tax loss purpose. Sell when the drills are turning or the promotion starts. Don't worry if you really like the company's story you can always buy it again in a future date.

Rule #7: Do a bit of due diligence. Do yourself a favor research the management and see what their track record is. There are two types of management, one that uses the public company as an ATM forever issuing stock to pay management fees and to live a lifestyle. The other is a company builder. These guys have real experience in creating value for shareholders, stick with these guys. If they made money for people in the past they will have full support going forward.

Rule #8: The wall of cheap paper. Once again visit SEDAR and download the financial statements. See how many cheap shares, warrant and options are due. Nothing worse than walking into millions of cheap shares hitting the market.

Rule #9: All juniors have a cycle. A tax loss cycle, a money raising cycle, a news release and news vacuum cycle, winter spring summer fall cycle and a major distribution of paper cycle. Typically I like to buy my stocks in December. Not only is a tax loss cycle but a news vacuum cycle also. The saying "sell in May and go away" holds true for the most part. Stocks generally rise in the spring when companies are trying to raise money. If they plan a drilling program generally the results are not published until September or October. Leaving  a news vacuum over summer. But lets face it, any buyers with money are usually taking the summer off and not paying attention to the markets. Learn the yearly cycle of a stock and you can make lots of money off it.

Rule #10: Geo politics matter. Ask anyone who invested in Venezuela, Democratic Republic of Congo, Bolivia or Mongolia. Sure there can be some spectacular plays in these countries today but they can easily be taken away tomorrow. Try and stick to western friendly countries.

 Rule #11: Listen to the little voice. How many times have I told myself this "woulda coulda shoulda". Learn to recognize that instinct, it will save your bacon.

Rule #12: Open and trade through a Tax Free Savings Account (TFSA). This is the best thing that the Canadian Government ever did for the investor.

Rule # 13: When stocks make a large run up, the run up can usually sustained  a 3 day price surge before the buyers fatigue.

Tell it like it is: Introduction, history, strategy and caveats

My name is Dave Bowes, I started this blog to share my thoughts and strategies on trading junior resource stocks on the TSX Venture Exchange and the TSX.

Over 20 years ago I started out as a floor trader on the Vancouver Stock Exchange (VSE). The background picture for this blog was taken by myself of the deep end of the VSE trade floor once located at 609 Granville St. Vancouver.

After the VSE I went on to a role of corporate communications for public companies. I have promoted most sectors including oil and gas, gold, silver, base metals, industrial and agricultural companies. This gave me a strong insight into the cycle of junior investing.

I have stepped away from working in the industry and now I have a clearer insight into the mechanics of how and why the value of juniors goes up and down. Once you understand the cycle of how juniors work you can make some money from their price fluctuations.

Currently I work as a mortgage broker in British Columbia, my main focus is on private lending in the residential mortgage market. 

As with most junior resource investors I have had my share of wins and my share of dogs. The trick is to limit the amount of dogs that you have in your portfolio.

I will post when and what shares I have purchased and or sold when I discuss any company. I will share my reasoning behind my decisions.  


My ideas are sourced from a variety of places, I have built a strong network of level headed brokers, promoters, successful individuals who share their insights. I constantly monitor the most active traders and news headlines for clues into the next possible winner. 

I buy and sell on a regular basis and may or may not have a vested interest in the companies discussed herein.

Please note that these are my investment strategies in high risk stocks. Please consult a qualified investment adviser before making any investments that suite your investment style.