In my Blog of June 30, 2012, www.cymorfund.com I discussed how there is greater Political Risk in certain jurisdictions than others. I suggested that when considering investing in companies, one should give a higher value to companies operating in “Safe Jurisdictions”.
Today, I mention some examples of why I consider Jurisdiction Risk and Political Risk very important in the composition of one’s portfolio. When one considers creating a portfolio, diversification is very important. This is an accepted Investment Truism. If nothing else, the dramatic swings in stock values over the last 4 years should convince doubters.
Gambling in the Stock Market
It is realistic that a small portion of a portfolio may be used for stock trading, or other forms of gambling. But one should never gamble with an entire portfolio by heavily concentrating in a single sector, or in a single geographical location. Getting wiped out economically in not fun.
The question is, Which Juniors? When reading Analyst’s reports, there are many companies in the exploration and development of natural resources to consider in many parts of the world. Sometimes stocks get beaten down because of Political and Jurisdictional Risk. When things are calm and everyone is optimistic, stocks tend to rise or fall based on the prospective value of the investment.
However, when troubles or unrest crop up, or news of government interference crops up, stocks in these jurisdictions face a greater fall than those stocks not in those jurisdictions.
South American Silver Corporation is a company that is attempting to grow and advance one of the world’s larger silver, indium and gallium resources. This is a good company, but it is an example of the issues that I am referring to.
I quote a recent press release from the company as an example. 14 June 2012 – Vancouver, British Columbia – South American Silver Corp. (TSX: SAC, US OTC: SOHAF) wishes to provide an update on recent events in Bolivia. Officials from the Bolivian Ministry of Mines recently met with the local indigenous communities near the Malku Khota project and confirmed that a small group of people carrying out illegal artisanal mining on exploration concessions owned by South American Silver have been encouraging confrontations between communities and attempting to interfere with work on the project. Groups associated with this illegal artisanal mining activity have joined with activists from outside the local community and have recently held protests in La Paz and are now protesting near the project site.
Canada is One of the Safest Jurisdictions. Quebec is the Best Jurisdiction in Canada.
As a comparison to the issues of South American Silver, one may look at Quebec in Canada, which is one of the friendliest and most proactive mining jurisdictions in the world. Other Canadian provinces may not match the unique advantages than Quebec offers, but everywhere in Canada is safe, secure, and business friendly (with some grimaces when thinking about British Columbia).
Some Canadian Companies That Have Great Value
Mines Virginia Inc. (TSX:VGQ) This is a gold producing company located in Quebec with excellent management, a good track record, some good resources and an active exploration and acquisition program.
Golden Valley Mines (TSXV: GZZ) This is a beaten up junior with experienced and involved management. They have a wide and diversified portfolio of projects and a management style that lets others spend the money in JV’s. An issue with GZZ is that the market does not seem to rcognze the value.
Altius Minerals Corporation (TSXV: GZZ) This is a company with amazingly good assets. Its porfolio of projects, ownership of interests in other good companies, with real cash in hand now with more in the future, makes this stock a very compelling story.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds. Larry Cyna and/or the CymorFund have positions in the shares of companies mentioned.