Small cap mining stocks have endured some of the hardest price falls on the market this year, with ‘basic resources’ putting in the worst performance of all the 19 industry sectors on AIM during the past two quarters. But while investors continue to be cautious about mining minnows, a handful of recent price rises among these companies has led to an astonishing performance by one of our most ruthless bargain-hunting stock screens. 

Ben Graham’s value-oriented Net Nets approach to finding out-of-favour shares at the very bottom of the market was one of the best performing of Stockopedia’s GuruModel strategies earlier this year. It focuses on shares that are trading at a price well below a conservative liquidation value of the entire company (you can read more about how it works here). Since then, bullish sentiment has tended to favour momentum and growth investing strategies, with deep value stocks losing some of their appeal (click here to read about how that change has unfolded). But over the past month, some of the shares currently held in the Net Nets portfolio have produced some remarkable advances – and most of the big gainers have been small cap miners. This suggests that the market has been pricing a number of junior exploration and development companies at less than the value of their assets – and those prices are now beginning to bounce back. 

As you can see from the chart, Net Nets was losing ground against the FTSE earlier in the summer but its fortunes changed in August and it now boasts a year-to-date return of 38.5% (up 32.4% over the past month alone). Ten of the 25 shares in the current portfolio are mining companies and some of them have seen strong individual gains. They include ECR Minerals (LON:ECR), a micro cap gold and base metals project developer, which has saw its shares rise by 212% to 0.33p during August helped by news that it is close to confirming an earn-in on the Itogon gold-silver project in the Philippines. 

With a price gain of 154% to 10.8p during August, Red Rock Resources (LON:RRR) has been another strong performer for the Net Nets portfolio. Red Rock has an iron ore project in Greenland, a…

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