Musings on Investing

Arbitrage in Junior Mining Industry

Helio Resource (HRC.V), and Many Others

At the recently held International Metal Writers Conference in Vancouver, I presented why as a value investor I am a big fan of arbitrage opportunities.

I often find 30% to 70% upside in investing for arbitrage in the junior mining sector. If I have an understanding of the underlying value of the assets, I can position myself for a very low-risk high-reward situation.

Here is the speech I gave:

Subsequent to my speech, I discussed about investing for arbitrage with Mining Stock Education, and Junior Insider:

Arbitrage opportunities are truly exceptional ways for retail investors to make money. What you need is an understanding of basic mathematics and confidence in your numbers. Of course, you must also have some confidence in the underlying assets and the management, for you don’t want to see the share price of your investment crash after the merged entity starts trading.

Let us discuss one opportunity whose underlying value I feel good about, the acquisition of Helio Resource (HRC; C$0.015):

Each HRC share will be converted to 0.227766 share of Shanta Gold, an entity that trades in London. Shanta Gold last closed at £0.0502. This means that HRC is worth 0.227766 x £0.0502 x 1.66 (which is the exchange rate between GBP and CAD). This makes HRC worth C$0.019, offering you a 27% arbitrage upside. Of course making money by investing in HRC is possible only if you are patient enough to let HRC come to you at C$0.015.

Here are several other arbitrage opportunities that you might want to explore for yourself:

  • Crusader Resources (ASX.CAS; A$0.11) is being acquired. Arbitrage upside is about 20%. Unfortunately, CAS has historically made losses, so I am not sure if this trend will change. They do however have meaningful assets.
  • Cobaltech Mining (CSK.V; C$0.13) is entering into a three-way merger. There is for now a nice arbitrage upside, but I am far less sure of the value of the assets, and find the risks relatively high.
  • Exterra Resources (ASX:EXC; A$0.04) is being acquired by Anova Metals.
  • Zazu Metals (ZAZ.V; C$0.295) is being acquired by Solitario Exploration & Royalty.
  • Avnel Gold Mining (AVK.V; C$0.40) is being acquired by Endeavour Mining.

To stay informed of arbitrage opportunities, I subscribe to email-lists of most mining companies. I also subscribe to RSS feed on Mergers & Acquisitions of Marketwired.com.

Finally, money is only a tool. I derive satisfaction from personal growth and philosophy. Please do not forget to register for the next Capitalism & Morality seminar. You will meet legends like Ian Plimer, Doug Casey, Jan Narveson, Adrian Day, Dayna Martin, Rick Rule, Bob Hoye, Butler Shaffer, and many others. The ticket price will increase on 15th July.

Warm regards,

Jayant Bhandari

Associate: Rajni Bala

 

 

Disclaimer: All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. The sole purpose of these musings is to show my thinking process when analyzing a stock, not to provide any recommendation. I will not and cannot be held liable for any actions you take as a result of anything you read here. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found on this site, expressed or implied herein, are committed at your own risk, financial or otherwise.

1 Comment on "Musings on Investing"

  1. Hi Jayant,

    I want to make sure I’m on all your mailing lists.

    Thank you,

    Dave

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