1. Before the recent mining book even started in earnest I made a great deal of money on Aquarius Platinum options. I purchased these for 25c and sold them for $8.75. When I bought them they were a $4mil company. In the mining boom they were worth as much as $4billion. But I had already made my fortune by 2000. I was living in Japan at the time. Platinum prices at the time were doing very well, but also management had a string of good platinum projects which South African (open cut) and Australians (platinum) analysts did not understand. Investors in London quickly appreciated the stock when it was listed on the Alternative Investment Market (AIM) in London. I made almost 3000% on the options in 3 years. You need to understand why. Decision making in financial institutions is driven by managers who invest in old, proven paradigms. If they ever had critical thinking skills they abandoned them when they moved into mining finance. I assure you stockbroking is all about making money, so you can understand why broking executives like proven stories. My former employer would introduce me as 'This is Andrew......he picked Aquarius Platinum several years ago'. I had become a 'bankable proven story'.
2. The other stock was Minotaur Resources. This was also a very cheap stock - capitalised at just $2mil at the time. It had even less when I bought it. Just a VERY large untested coincident geochem/geophysical anomaly in an outback Australian area where nobody had ever looked for base metals. What was more interesting was that there was a $4 billion mine (Olympic Dam) up the road. I bought the shares at 14c because the options were tightly held. In the week following I managed to pick up $6000 of options at 5c. I actually sold this stock too early. Several months passed as I anxiously waited drilling results. In all honesty I was VERY pissed off with the management of this company. They waited until they completed the hole at 729m before they released the results to the market. I'd lost confidence in that time and sold the 'spec' to pay for a NZ holiday with my GF. Upon my return the stock had raced to $2.40, the options around $2.20. On paper I should have been a millionaire. I contemplated legal action, but I also said that I can do this again, since this occurred in the wake of Aquarius Platinum. So this stock offered gains of 4300% odd in around 3 months. The project was eventually bought out by BHP Billiton.
The implication is that a mining boom is like a rising tide that lifts all boats. It is actually harder to find great bargains in a mining boom because even speculative appeal has a premium value attached to it. There are thousands of analysts employed to search for such stories. They have just lost their jobs. When I bought these 2 companies no one was interested in them. In a mining boom Minotaur (the explorer) would have been valued at $40-60mil, and Aquarius Platinum around $150mil. The future lies with investors who can see new paradigms - not old proven ones that no every mining analyst appreciates. In 2001 analysts in Australia did not understand platinum (as there was only Helix Res, which had no great results). In South Africa, analysts did not understand the benefits of open cut economics, or the coming platinum boom. For a year there were no buyers after I bought Aquarius Platinum. Minotaur was the same - no one was interested in exploration, yet that is the time when you should be, if you can establish credible evidence that they will be a future miner. Minotaur's first drill intersection was over 400m of 1% copper. No question that is going to be a mining operation.
Paladin Resources was another example. I actually missed this one, despite having looked at it. I missed it because I did not attempt to understand the uranium market 8 years ago. If I did I would have realised that there was no new supplies to replace the depleting weapons-grade uranium stockpiles. Instead I diminished the story thinking 'There is plenty of uranium'. The issue was however - 'Lack of operating mine capacity in an energy boom'. Plenty of resources, not enough capacity, and it takes 4-10 years to commission a new mine. Paladin did very well like the stocks above. Another more recent great story was Queensland Gas Co. In fact all coal seam gas producers have done pretty well but I liked that this company has the largest acreage close to gas transmission pipelines, but Arrow Energy was another good one. QGC is now being taken over by British Gas. So what is the next great story? I've got some ideas.
Stock analysis is a conceptual science which requires anticipating future events. The returns are greatest for those people who can see further and wider than anyone else. There is money in it. You don't even need people skills to achieve these results. But you need something else.... the right trading psychology. Issues such a patience, keeping information in perspective, assessing market sentiment can lead you astray.
For those who buy the report I will identify a number of stocks which will offer spectacular returns in future. There are 3 stocks which I have in mind based on the current market dynamics.
This is a good time to start looking!
Andrew Sheldon www.sheldonthinks.com