Having funds available is no longer a reliable indicator that a mining stock is doing well, said Joe Mazumdar of Exploration Insights.
In tough markets, being able to raise money is seen as a sign of success for mining companies — but what happens when cash is readily accessible?
Speaking to the Investing News Network, Joe Mazumdar, editor of Exploration Insights, said having funds available is no longer a reliable indicator that a resource stock is doing well.
Mazumdar recently participated in the virtual Precious Metals Summit, where he met with around 40 companies, all of which had money.
“These guys weren’t appealing to investors to give them money because they already have money,” he explained. “They were basically appealing to people to buy their shares on the market.”
For that reason, Mazumdar said that in this environment it’s important for investors to pay attention not only to whether companies have money, but also to how they raised it.
“So did they raise it with warrants, did they raise it with warrants that are just slightly above the price of the unit? Did they raise it with warrants that are short-term warrants, or did they raise it with warrants that are long-term warrants?” he asked.
“Did they do a flow-through financing? Do companies need to do flow through in this environment given the demand for these kinds of equity plays, especially in Canada?”
While digging deeper into company finances is a good idea right now, Mazumdar said that in general he wants to see firms with good management teams that can deliver on the plans they lay out.
“I’m still looking for projects that make sense in any environment,” he said. “The key is the management team that’s supposed to be able to mitigate the risks, raise the capital and execute the plan.”
For more from Mazumdar on what commodities he’s interested in and how to play the resource space right now, watch the video above.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.