Today’s investors must recognize that we no longer have the comprehensive brokerage house research support for stocks as in the past; research has declined for over twenty years and that lack of analysis will continue. Why? Because the spreads between stocks’ bid and offer prices have become so narrow that the brokerage houses’ and banks’ market makers’ profits are minimal if not non-existent. The profitable wide spreads in the past paid for research and provided capital for brokerage market makers to support their stocks and trading. Gone! Thus computerized trading coupled with today’s tiny spreads between the bids and offers shattered the profitability of “making markets” by market makers. Those “now lost profits” did support research and provided trading capital for years.  

Today our research finds many precious metals and resource stocks that are at prices that may be exceptionally undervalued.  Investors can take advantage by accumulating stocks that research indicates as undervalued. Lack of market maker buying support coupled with the fact that research coverage is almost non-existent for small caps creates extraordinary opportunities. Many stocks drop to price levels that are far below their bottoming price areas of the past. The lack of market maker buying support makes declines even larger.

The key to understanding the present situation is this: In the past, we saw market makers often holding 200,000 to more than 500,000 shares and often more of the small caps and junior mining stocks that they made markets in. It was normal to keep $20,000-$50,000 worth of  stocks individually and often more in inventory. Brokerage research reports would at the same time be recommending the stocks for investors and inventory in the shares often had shares being bought by investors.  

Since there is very limited research coverage for most companies, investors are generally unaware of many undervalued stocks. At present, investors typically see the narrow universe of stocks that the brokerage houses recommend. Few are undervalued…very few!  That is not going to change. Investors must look for other sources of investment information and research. There are numerous research sites available covering the metals and mining industry and most are free.

    Two companies, among the many we follow that we are monitoring now may have dropped to prices that merit attention. Both companies have had for at least the past five years, every “insider transaction” as a purchase of their own companies’ shares. The only sale was that of an insider (officer or director) selling personal shares to pay off debt of the company-not for personal profit.

Imperial Mining “IPG” on the TSXV, .06 cents is a newly created Québec‐based exploration and developer of base metal, gold and technology metals deposits and rare earth metals. Yes, the same rare earth metals primarily controlled by China that are the subject of the recent news.

 Imperial was originally a private corporation and acquired assets of two exploration companies in exchange for common shares of Imperial Mining. It rolled its’ Québec technology metals project (scandium-niobium-tantalum-rare earths) into Imperial Mining as well.  

We believe that their Scandium project offers exceptional potential as results in our opinion indicate that Imperial’s scandium project is not only substantial but contains sufficient resources to supply North American Scandium demand for twenty years…at least. The previous belief that any North American supply was insufficient has been the overriding fear. We believe that will not be the case as further drill results and confirmations become available.

Cartier Resources, ECR, .15 cents is a Val D’or, Quebec based mineral exploration company that trades on the TSX Venture Exchange. Its three main projects are located in the mineral-rich Abitibi Greenstone Belt in Quebec. Cartier’s strategy has been to focus their exploration in areas where gold has been found and mined before and where the required infrastructure to bring a mine into production cost efficiently is already in place. Management’s primary focus has been to enhance the value of Cartier Resources.

Cartier Resources has shown consistent heavy insider buying by its president Philippe Cloutier over the last ten years. We noted that he purchased Cartier shares at prices from as high as one .90 cents all the way down to .05 cents per share. He now owns 3,353,000 shares of Cartier at an average of .17 cents. It is among the highest amounts of purchases by a CEO in the junior sector. While the market may be overlooking a potentially undervalued situation, NYSE and TSX listed Agnico Eagle purchased 19% of the Cartier two years ago. Evidently someone saw potential value there; that someone was a billion dollar capitalization Toronto Stock Exchange and York Stock Exchange listed mining company.

Insider analysis is not a perfect method of analysis but it is a valuable tool that used in combination with other fundamental indicators can result in accumulating stocks at or near their price bottoms.  There is no perfect method of stock analysis but there are specific  “tools”  that in our view demand their use.