quarterly reports released., page-5

Some more idle thoughts for a Sunday afternoon.

It has taken me some time to get my head around how the market is treating junior resource stocks at the moment - especially when you see little movement in share price on release of good news such as decent maiden resource statements.

Not saying I'm right, but here is my take on the junior resource market - "Cash is King". An old saying but a good one. I'm not talking about cash flow of a project, but when will the company return cash to its shareholders?

There are many undervalued junior resource stocks, MEP is just one of them. Fundamentally, MEP is hugely undervalued given its cash and market value of its investments is not far from its market cap and it has some great projects. MEP is better placed than many given it has cash to progress those projects. Many have great projects, little cash to progress them and a low share price so any capital raising will mean big dilution.

While MEP is in a great position, to put it simply, when is a shareholder likely to see a return by way of dividend. Unless they pull off a $100M+ sale of one of their assets, any cash raised will be spent on further drilling and exploration. I agree that is how they should spend the money raised, but its not likely to generate any divdends for some years and in the current market, its all about income and not growth.

I know of another stock that has recently commenced production and appears to be cash flow positive with little or no debt. However, the share price is dropping. I think this is because many see that any cash from production will go into funding further development and expansion and therefore once again no dividends to shareholders for some years.

I could go on with more examples, as I'm sure many others can too.

This is not keeping me away from this unloved area of the market. Like Kippax said, I am just patiently waiting for some of my picks to show their true value so I can accumulate in others. The great thing about investing based on fundamentals, is that sooner or later, the fundamentals show through and the true value reflected in the share price.