I've spent the past two days at the New York Hard Assets Conference. For investors in the mining sector, I find attending these conferences to be priceless events - the congregation of mining executives and professional investors provides outstanding opportunities for networking, getting great information on opportunities, and continuing the never-ending process of education. For these reasons I try to attend as many conferences for resource investing that I can.
There were a number of companies presenting at the conference that left a strong impression on me. Some of them are especially small - market capitalizations under $100 million - but two that are a bit more mature and have passed the $100 million mark are Virginia Mines and Silvercorp. Below is a brief introduction to these companies.
Virginia Mines (VGMNF.PK). There's three things I love to see: (1) a company with an especially large and unique property yielding very high grade gold; (2) a joint venture model in which the company has shifted the burden of mining on to a trusted partner, preferably a major producer; and (3) a market capitalization that is at or below its book value or a conservative discounted cash flow valuation. Virginia hits on all three. The company's properties in the James Bay region are unique - large, unexplored and in a great jurisdiction (Quebec, Canada) - and initial geological studies show very high grade gold. The company is utilizing the joint venture model whereby it will earn royalties on mines that it has done the legwork for before passing off to a miner - and in fact if we discount the future cash flows from royalties the firm is already receiving (let alone royalty streams that will commence soon), we get a number above its current market capitalization of around $300 million. As a result, Virginia Mines is on my watchlist.
Silvercorp (SVM). Those who've been invested in Silvercorp - and that includes me (see my previous coverage) - have certainly had their share of pain. Silver has been hit hard, silver stocks have gotten hit even harder, and Silvercorp has gotten hit harder than many silver stocks. Yet the undeniable truth remains: Silvercorp is the lowest cost silver producer, and it is well-prepared to reach its goal of doubling production within three years. The stock is so beaten that I find it tough to remain a true believer - but of course the best time to buy is often when it is the toughest to do so. In light of the contrast between the sentiment surrounding the stock and its fundamental performance, I think Silvercorp is a screaming buy at these current prices. The presentation at the New York Hard Assets Conference only reinforced this belief for me.
My intuitive take on sentiment at the conference was that fear and worry were thriving. This is the kind of environment that I think is ripe for buying.
Disclosure: I am long SVM.