Mirasol

I bought Mirasol Resouces in Febuary. This is a very new mining company and joins my other junior mining companies, Exmin, Cornerstone, Canplatts, and Paragon, the later I got as a spinoff from Rubicon. They all ave a similir business model that sets them apart from many other mining companies. Now junior mining companies are not for the faint of heart. Most go through tons of money and never develop a producing mine, and evenually go bankrupt. However those that do succeed richly reward their stockholders. It's sort of like buying a lottery ticket, but in the stock market. Lots of loosers but a few big winners. The difference with the companies that I have invested in can be compared to the lotteries. Which deal would you prefer: buying one ticket for $2 or ten tickets for $2.

Obviously you would want the ten ticket deal. These companies go out and stake claims to a lot of land that they think has the potential to contain possible new mines. They then get other mining companies to do the much more expensive drilling of the property to see if there is actually enough minerals in the ground to warrant the major drilling progrm that needs to be done before mine construction can begin. As a bonus they usually get the other company to pay for the privilage of spending the money. Of course the other company gets something in return, an interest in the property. However this is worthless unless a mine is actually developed.

With these stocks, you buy them and keep them, sometimes you may wait for years returning nothing, and thenthey are suddenly worth many times what you paid for them. These types of stocks make up a very small proportion of my portfolio, so I will not lose much if they never develope a mine, but I will have a nicegain, if even just one is successful.

Bought Falcon Oil and Gas

I had bought a half position in Falcon last year. When the Stock went down to just over $2.00, early in Febuary I bought more. This is something I have done a number of times. If a stock I like goes down considerably for a reason that does not change its long term outlook, I often buy more. The stock has risen from $2.17 to over three dollars. I am now showing a profit on my whole position, even though my original purchase was at an even higher price.

Falcon is developing a very large gas find in Hungary. It was first drilled in the seventies, but had to be abandoned because the technology available at that time could not handle the high pressure and depth of the wells. The improvement in technology over the last thirty years makes it now possible to develop this gas pool.However this is a high risk investment. The wells are among the deepest in the world and very expensive, thus each well has to be very productive to be profitable. the company also needs fairly high gas prices and has yet to get a production licence. On the other hand , if everything works out the rewards are huge, the reserves are estimated to be as much as all the proven reserves in western Canada combined.

Bought Forsys Metals

Back in January I had an opportunity to participate in a secondary offering of Forsys Metals. A secondary offering occurs when a public company issues treasury shares to raise money for certain purposes by the issuance of treasury shares. In this case Forsys is a junior mining company that is developing some uranium properties in Namibia. I didn't own any pure uranium plays and the established mining companies are quite expensive. While there is some risk in buying uranium stocks with the price of uranium so high, this risk is offset in this case by the fact that there is a natural increase in value of a mining stock when a mine begins production. Forsys will probably be trading at a higher price than I paid for it even if the price of uranium falls.

Why does the stock go up when a mine begins production? Sometimes disaster happens. Caminco, the largest Canadian uranium miner was developing a mine at Cigar Lake last year. Before any uranium was mined the mine was flooded. Extra months of time and millions of dollars more will be needed to bring the mine into production. Cominco can afford this, but for a junior mining company like Forsys, something like this would be devastating. There is a very substantial risk in investing in Forsys, however the potential rewards are great. You have to make a rational examination of the risk versus the potential reward. In this case I thought the reward was worth the risk. So I bought a half position in Forsys at $4.75 a share. I won't be able to sell these shares until June. Right now it looks like a winning investment as the stock has traded at over $9.00 before falling back slightly just recently.