Hi everyone,
I am interested in investing in bauxite stocks but I am having trouble narrowing down which companies to invest in. I am not an experienced investor but I have been a small business bookkeeper for 20 years and so I understand how to read accounts and the importance of cashflow. I have always been interested in the stock market but until now I have never had enough significant money spare to invest without the fear of its loss affecting my family. However, I recently received a small inheritance and so for the first time in my life I have some genuinely spare money and a chance to do something I have always wanted to do without worrying about ending up losing more than I can afford.
I plan to divide my bauxite investment ($20,000) between 2-3 companies and, like everyone else, I am looking for the best return on my investment while at the same time minimizing my risk as much as possible. But I also want to be clear, I do want to take some sensible risks. If I wanted a small guaranteed return I would invest in a fund but I don’t want this. I want a chance to see if I am good at this and I am prepared to take risks to make life-changing money. Obviously, I am hoping that I turn out to be an investment whiz and make a fortune but I am realistic enough to be happy with making a bit, or at least not losing too much.
I have spent some time looking at the different companies in the bauxite sector and the companies I have found so far are :
Australian Bauxite Ltd – Mkt cap $21.32M
Bauxite Resources – Mkt cap $15.65M
Canyon Resources – Mkt cap $35.49M
Lindian Resources – Mkt Cap $6.99M
Metallica Metals – Mkt Cap $18.37M
Metro Mining – Mkt Cap $308.5M
Pacific Bauxite – Mkt Cap $14.39M
Queensland Bauxite – Mkt Cap $26.61M
I have also looked at the published ore assets for each company
Australian Bauxite – 124.6 million tonnes – Jorc inferred & indicated (according to presentation)
Bauxite Resources – 396.5 million tonnes – Jorc measured indicated & inferred (according to presentation)
Canyon Resources – 554 million tonnes exploration target (according to posters on CAY board)
Lindian Resources – 37 million tonnes historical resources (according to posters on LIN board)
Metallica Metals – 18 million tonnes – Jorc plus upside (according to presentation)
Metro Mining – 99.2 million tonnes – Jorc proved and probable (according to presentation)
Pacific Bauxite – I have not been able to find any information on this.
Queensland Bauxite – 193-403 million tonnes exploration target (according to presentation)
My initial, but by no means expert, first thoughts are as follows:
1) Australian Bauxite – looks good with a lot of resources upside compared to their current Mkt cap. Even if they can convert half of this into proved and probable status (like Metro Mining then they should have a Mkt cap of about $200M.
2) Bauxite Resources – Looks even better than Australian Bauxite. Lower Mkt cap currently and if they can convert half of the I & I into P&P then they should ultimately have a market cap of $600M – but this seems an awful lot for a company only valued at $15M just now.
3) Canyon Resources – They have an awfully large exploration target and this is reflected in the current $35M Mkt Cap but since none of it is Jorc qualified, how much is likely to end up as P&P status? Why should they be valued at a Mkt Cap of more than twice Bauxite resources when Bauxite Resources have 400MT that already has Jorc status? To justify this difference surely they should need to have nearly 1B tonnes in exploration?
4) Lindian Resources – They have a very small amount of ore and it is non-Jorc. However, they also have a tiny Mkt cap. The big question for me here is what rating to put on their 37MT of historical resources. Is this equivalent to I&I or P&P? If it is the second then there could be a lot of potential upside there when it becomes formalized. If it is the former then not so much.
5) Metallica Metals – They seem to have the smallest amount of ore compared to Mkt Cap. Why are they valued at $3M more than Bauxite Resources when they have less than a twentieth of the ore? Even when compared to Lindian Resources they are valued at nearly three times as much with less than half the ore?
6) Metro Mining – Massive market cap, proved and probable reserves, and the company that all the others aspire to be. However, they have gone up in value by ten times in less than 18 months. I think I may have missed the entry point on this one as I cannot see them being valued at $3B in another 18 months time.
7) Pacific Bauxite – I cannot find any information in presentation or on the boards about even a potential exploration target. Does anyone have more information on this?
8) Queenland Bauxite – Large exploration target, similar to Bauxite Resources but a significantly bigger Mkt Cap. Also, with their cannabis acquisition are they still even interested in Bauxite?
So far my first look at these companies has my order of preference like this:
1) Bauxite Resources
2) Australian Bauxite
3) Queensland Bauxite
4) Lindian Resources
5) Canyon Reosurces
6) Metallica Metals
7) Metro Mining
8) Pacific Bauxite
My problem is that I know I am almost certainly wrong in my views but I don't know why!
I am posting this same message on each of the boards in order to get your input and I do not expect a detailed response from everyone on every share but I am new to this so if anyone would be kind enough to give me some feedback on what you do know of these companies, or where you suggest I go and research, it would be very helpful to me.
My knowledge on this is limited and I am trying to improve it before actually investing my money. I do not mean to be rude about any of these companies and if I have under-estimated them it is my lack of knowledge that is at fault. For example, I am unsure if there are factors at play that make the large resources inherently less valuable than some of the smaller ones and if someone could enlighten me it would be great.
I thank you in advance for your help and apologize for my annoying questions. I understand that there is nothing more annoying than educating a novice but if people are kind to me I promise in turn to help others as my knowledge becomes greater over time.
Thanks,
Gunslinger-SA
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