Finding value in mining and exploration stocks is not always easy. Firstly, you need to know where to look; and that's often outside the most obvious places. You also need to recognise that no two investment propositions are ever identical. So it's rarely, if ever, a case of comparing apples with apples.
Companies who have successfully articulated their value to the market are usually well covered and well supported. Well covered in the sense that there are already a myriad of investor opinions in ether, complimented by broker notes and, perhaps, a sprinkling of media articles. And well supported in that discussion boards will wax lyrical on the virtues of the company and how rosy the future is looking.
However, as befits the exploration business, to stay one step ahead of the herd one often has to venture off the beaten track and perhaps search out those companies which are not well understood, or loved by the market.
Obviously, the more straight-forward the business model, the easier it is to get your head around. So a company with an intricate portfolio of components is going to look like hard work from the off; demanding hours of diligent analysis before you will even know if there is any real value potential. And this is the point where most investors will simply give up.
It is most unusual for a company to actually set out to create a complex model; though it can often be taken down that route, either through adapting to challenges it has faced or through opportunities presented along the way. And it's also not unusual to find that such businesses tend to be run by a more entrepreneurial and adventurous breed of management.
So when you do come across an interesting but complex proposition, it will pay to make your first approach with an open mind. This may seem somewhat ill-advised, given the conventional market tendency towards caution. And let's face it; at the best of times, the small cap market can feel like it's been booby-trapped with more tripwires than a "Mission Impossible" film set. But if there's value to be had, you can be sure it won't be staring you in the face and likely as not, hiding away in exactly these kind of places.
Take for instance Electrum Resources (LON:ECR) formerly Mercator Gold. The company elected to change its name in…
