I continue to follow the U.S. Bail-Out story closely, as I am sure you are doing.  As a follow-up to last evening’s Post titled ‘Continued Saga – Desperate People Do Desperate Things’ I have the following additional ’20,000 foot’ comments:

1.    ‘Wall Street’ broadly is being painted as the ‘villain’ that got the U.S. citizenry into the current mess – much like the ‘Pied Piper of Hamelin’ who led the children from their village like ‘lemmings over the cliff’.  How fair is this? Indeed ‘Wall Street’ (which undoubtedly means different things to different people) facilitated home loans in circumstances where many of the borrowers did not have adequate prospective payment coverage.  Surely some of the responsibility must rest with the borrowers.  It is not only the lenders who evidenced greed.

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Background to this Series of Posts

This is the 5th in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.

Mining Company Risk Assessment

The following assumes a ‘single project’ company. If a company has more than one project the considerations discussed that are ‘project specific’ need to be considered separately with respect to each project. From an investor perspective important timing issues, risk assessment, company information, and an appropriate ‘risk related rate of return’ ought to be include a large number of common factors. Posts #4 – #10 of this Post Series discuss many of these factors – in some cases followed by discussion shown in italics. On a cautionary note, ‘Risk Factors’ are fact and circumstance specific, and no list or broad discussion of ‘Risk Factors’ should or can be considered all-encompassing.

Corporate Governance

1. What are the company’s Corporate Governance policies and practice, and are they adequate?

Companies typically disclosure their Corporate Governance policies and practices in their annual documentation. In simple terms the greater the stated strength of those policies and practices, the more comfort shareholders should have in the context of the Board and Management meeting their statutory fiduciary responsibilities.

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So what do I think at 8:00 p.m. on Monday, September 29, 2008, the day the DJIA dropped 777 points and a reported $1.2 trillion dollars has been ‘lost’ from U.S. Investment Accounts?  Here is what I think from my 20,000-foot view:

1.    Few people have a 20,000-foot view, and most commentators speak from a ‘vested interest position’.  Witness ABC News tonight.  Who spoke negatively about the failure of Congress to pass the Bill – money managers who saw their client accounts erode today, and with that erosion, erosion of their fees.

2.    I am surprised the Bill did not pass, given the ‘fear mongering’ that was built into its passage.

3.    Had the ‘Bail Out’ Bill been passed by Congress this afternoon, it would have resulted in a ‘tourniquet’

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An important new feature has just been added to www.stockresearchportal.com. Subscribers now can create a private, secure table where they can enter the names or symbols of all companies in the website’s ‘company universe’ they are invested in or monitoring.  The website’s automated data feeds will fill the subscriber-specific ‘Alerts Table’ for the following 6 data points, each for last seven days:

1.    Company Press Releases.

2.    Insider Trades.

3.    New Corporate Filings.

4.    Expert Commentary.

5.    Analyst Reports.

6.    Newsletter Writer Commentary.

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I find the ongoing Congressional Hearings interesting both directionally and in the concepts that are being put forward.  Having said that, I see this as a time where careful thought and actions are required in place of rhetoric.

The members grilling Messrs. Paulson and Bernanke are clearly unsettled and (in my view justifiably) angry.  They can’t figure out why ‘this mess’ has come on them so suddenly.  That is a very good question.  For years commentators have been talking about the amount of debt both the U.S. and its citizens have been accumulating, the loss of U.S. manufacturing jobs, the use by U.S. Consumers of their houses as their personal ATM machines, and so on.  I see the matter at hand in concept as comparatively simple, the devil is – as usual – in the detail.

Having listened to President Bush’s ‘address to the nation’ last evening and reading the latest write-ups on the state of negotiations on the ‘bail-out bill’ before Congress my views first thing Thursday morning are:

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Background to this Series of Posts

This is the 4th in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.

Mining Company Risk Assessment

The following assumes a ‘single project’ company. If a company has more than one project the considerations discussed that are ‘project specific’ need to be considered separately with respect to each project. From an investor perspective important timing issues, risk assessment, company information, and an appropriate ‘risk related rate of return’ ought to be include a large number of common factors. This Post and Posts #5 – #10 of this Post Series discuss many of these factors – in some cases followed by discussion shown in italics. On a cautionary note, ‘Risk Factors’ are fact and circumstance specific, and no list or broad discussion of ‘Risk Factors’ should or can be considered all-encompassing.

General Factors

1. The proper measurement of current business value is the present value of all future returns, where future returns are taken to be after-tax distributable or re-investable (in company growth) ‘free cash flows’. In the context of a mining project ‘free cash flow’ typically include the aggregate after-tax annual cash flow

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Background to this Series of Posts

This is the 3rd in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.

Exploration & Mine Development

Mining industries and the companies that participate in them face significant risks. These risks relate to:

1. The company’s ability to raise financing as required at reasonable and affordable rates.

2. The company’s ability to find mineralization that can be economically extracted in the contexts of:

• commodity prices both in the context of their cyclicality and the fact a mining company’s price recoveries are market dictated and entirely outside its control;

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Many years ago when responding to a question I said: ‘Old Sayings are Old Sayings because they have stood the Test of Time’. I have never heard anyone else make this observation – although it is hard to believe I could be the first.  One ‘old saying’ is ‘Desperate People Do Desperate Things’.  I see Henry Paulson’s proposed ‘Balance Sheet Cleansing Plan’ being drafted as this is written (Sunday, September 21) as something along those lines.

In Posts to this Blog on September 13th  and 15th  I talked about:

1.    My concerns with respect to ‘rapid decision making’ on the part of Paulson and Ben Bernanke without them likely understanding all the consequences of their actions.

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Background to this Series of Posts

This is the 2nd in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.

Investment Overview

Given recent and ongoing macro-economic change there has been increasing focus on the mining industry, and in particular on gold, silver, uranium, and base metal mining. This Series of Posts has been written to assist investors and investment advisors in their review and analysis of mining explorers and producers.

With respect to investment in publicly traded shares of mining companies, aside from company specific research and due diligence matters set out in these Posts, we believe investors who purchase or sell such shares should focus on at least the following things:
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Background to this Series of Posts

I concluded in mid-2005 the U.S.$ was going to fall against other world currencies, and focused on the mining and oil & gas industries. Much to my surprise, I found little written on ‘How to Value Mining Company Shares’. Having written the texts on Business Valuation used by many Canadian professionals, I decided to write an ‘Electronic Book’ dealing with what I think ought to be considered when valuing Mining Companies. I have recently updated that E-Book for purposes of this Blog have sub-divided it into 17 Blog Posts, of which this is the 1st. All 17 will be filed under the Category ‘Valuation of Mining Companies’ on this Blog. We hope you find this Post Series useful.

Index of Blog Posts in this ‘Mining Company Valuation Series’ and Release Dates

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