The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

*          *          *          *          *

I have frequently stated my belief that one risk element that must take center stage in any thoughtful investment research and analysis of a company are the politics, economics, and prospective economic well-being of the country(ies) in which that company principally operates. That is one important reason StockResearchPortal.com categorizes each mining and oil & gas company in its Company Universe by it business ‘type’ (e.g. explorer or producer) and the geography in which it principally operates. You can find these categorizations on the ‘Company Overview‘ page on each ‘Company Data Page‘ in our website, in the ‘Compare & Rank Companies‘ data component in our website, and in several other tables and data components in our website. You can also review the latest write-up on countries in which companies in our Company Universe principally operate by visiting ‘Economic Research‘ on our Main Nav, clicking on it, and then clicking on ‘Country Specific Economic and Political Commentary‘ found on top of the left Navigation Bar of the resultant webpage.

I recommend you read an article titled ‘One man’s defence of a national reputation‘ in its entirety by clicking here. The article discusses a Private Member’s bill currently before the Canadian Parliament that “aims to impose controls on powerful Canadian mining companies that operate overseas”. The Conservative Party, who currently operate under Canada’s Parliamentary System of Government as ‘minority government’ (the party with the largest number of Members of Parliament, but without a majority of those Members) are reported as having “vowed to kill the bill”, which apparently is going to be debated in a House of Commons Committee this week. The Bill is opposed by Canada’s Mining Industry which is reported in the article as:

· being comprised (in 2007) of 1,373 mining companies listed on the Toronto Stock Exchange (’TSX’);

· having had (in 2007) 79 billion shares traded on the TSX collectively valued at Cdn$482 billion;

· representing 60% of all world mining companies;

· representing 43% of total world mining exploration; and,

· allegedly having violated human rights in 30 countries, in circumstances the companies say they have done nothing wrong and, where there are no Canadian laws that regulate mining companies abroad.

Canada’s International Trade Minister Stockwell Day is reported as saying there will be no legislative action because it would not work, the companies do not need it, and “one country doesn’t develop laws that apply in another country”.

The article also reports that while Canada’s Members of Parliament consider controls, foreign pension funds have signaled they won’t invest in Canadian mining companies unless they adopt firm corporate responsibility rules abroad.

My comments on all of this are:

· first, having spent my adult life as an objective expert witness in major corporate litigation matters I can tell you unequivocally that its is easy to allege wrong-doing, that there are two sides (or more) to every story, that in litigation plaintiffs (i.e. in this case the countries that are protesting) often act for opportunistic reasons that go beyond the claims they make, and allegations in lawsuits often ‘overreach’ and are ‘overstated’. Stated simply, while I recommend you click here and read the referenced article, I suggest you do not leap to the conclusion that Canadian mining companies who operate abroad are guilty of anything until a Court decides otherwise;

· second, that mining (or any other type of) companies operating abroad have documented ‘corporate responsibility rules’ makes good sense to me as part of a company’s overall Corporate Governance. While I don’t know how many companies operating in foreign jurisdictions have such ‘documented rules’, I expect many do - and that going forward any that don’t likely will create such documentation; and,

· three, I think the fact that the referenced Private Member’s Bill has been put forward should be seen by investors as nothing more but something that focuses them, not on the behavior of the Canadian mining companies in foreign jurisdictions, but on the question of how (if at all) the politics and economics of any particular jurisdiction influences the ‘risk profile’ of a company operating in that jurisdiction.

Research Gold Stocks

See Blog Legal Disclaimer

Email this Post to a Friend.

An article titled ‘Foreclosures Rise’ says that according to RealtyTrac (described as the online marketplace for foreclosure properties) 1 in 84 U.S. housing units received at least one foreclosure filing in the first half of 2009, up 15% year/year.  This strikes me as an unconscionable number, being 1.2% of all housing units, but at the same time I am surprised that the year/year increase isn’t greater.  I think the more useful statistic would be the amount in absolute $ that the average U.S. foreclosed housing unit is fetching in mid-2009 versus what it fetched in mid-2008.  That would provide an indicator of the increased losses that are being incurred on foreclosed properties by lenders.

Click here for Research on Silver Mining Stocks.

See Blog Legal Disclaimer

Email this Post to a Friend.

Background to this Series of Posts

This is the 17th in a Series of 17 Posts that published on this Blog from September 16 to November 11. All 17 Posts can be found 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.

Required Rates of Return on Investment

As a result of the high risks inherent in mining exploration and mineral mining and production, in my view the rates of return investors should seek are much higher at the beginning of the exploration process and through to and including production than are conventional required rates of return. Required rates of return are relevant to, and hence determined at, specific points of time. They can change instantly with mineralization discoveries, enhancements, poor drilling results, quantification of NI43-101 compliant proven and probable reserves, mine permitting, material changes in commodity pricing, and so on.

In my experience conventional ‘starting point’ ‘targeted’ ‘strategic corporate acquirer’ ‘nominal’ (i.e. including consideration of prevailing inflation rates) unlevered (i.e. a pre-levered ‘return on equity’)

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 16th 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 appear 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.

Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 15th 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.

Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 14th 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.

Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 13th 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.

Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 12th 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.

Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 11th 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.

Valuation Methodologies - Introduction

This Post and Post #13 - #16 canvass the valuation methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:

1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.

Continue Reading »

Email this Post to a Friend.

Background to this Series of Posts

This is the 10th 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.

Mine Life

For a producer at least the following questions need to be addressed with respect to resources, reserves, capital assets, production capacity and efficiency:

1. What is the company’s estimated mine life at any given point in time having regard to where in the commodity cycle metal prices then are?

Continue Reading »

Email this Post to a Friend.