Members of our Inner Circle service often ask for our advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from large multinational companies to the most speculative penny mines and gold investments.
For example, an Inner Circle member recently asked for our advice on Northern Abitibi Mining. The company has reported some promising drill results from its gold project in Newfoundland.
To give you a sense of how my Inner Circle service works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it.
Q: My question is about Northern Abitibi on the TSX. I have a friend who is a geologist and who recommended this company to me. Northern Abitibi has proven that the Viking property that they own has an abundance of gold. I am highly invested. What do you think of this gold investment’s future? Thank you for your insight.
A: Northern Abitibi Mining, $0.29, symbol NAI on Toronto (Shares outstanding: 71.8 million; Market cap: $20.8 million, www.naminco.ca), is focused on exploring its Viking gold project in Newfoundland.
The company has completed a total of 9,735 metres of drilling in 58 holes. It has also excavated 13 new trenches, from which it has collected 985 surface samples and 243 soil samples.
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The company has intersected gold mineralization in many holes, including intervals such as 80.9 metres grading 0.8 grams of gold per tonne in one hole and 32 metres grading 1.8 grams per tonne in another.
Northern Abitibi raised $1.2 million in a share issue earlier this year. It also received a government exploration grant. The company still holds cash of about $1.2 million, or $0.02 a share. That’s enough to sustain the gold investment’s drilling efforts for at least the next year.
The company’s drill results give it some speculative appeal, but it’s still a long way from finding a mineable deposit. When you say you are “highly invested” in it, I hope that means you are more heavily invested than usual for a stock with its risk profile. After all, it has no history of earnings, much less dividends, and the gold investment’s future depends heavily on further success with drilling and development.
Our buy/sell/hold advice on Northern Abitibi, based on the prospects for its Viking gold property, is only available to members of our Inner Circle. You can’t get it anywhere else! (Note: If you are a current Inner Circle member please click here to view Pat’s recommendation. Be sure to log in first.)
Avoid being too heavily invested in one stock—especially highly speculative gold investments
We advise against investing heavily in any one stock, regardless of how attractive it appears. That recommendation applies even with well-established companies that have attractive balance sheets and a history of earnings and dividends. Even these relatively low-risk companies can wind up being serious disappointments. For example, unexpected problems in the company’s industry can cut into its earnings. When that happens, shrinkage in its p/e or per-share price-to-earnings ratio can balloon your loss.
It’s even more crucial to avoid going overboard in highly speculative early-stage mineral explorers like Northern Abitibi. The gold investment’s finds may never justify the building of a mine. Even when a junior company’s geological findings are strong enough that it can raise the money to build a mine, failure is still possible due to a variety of factors. Nobody can foresee the future. That’s why diversification is always essential.
If you’re looking for authoritative advice on investment issues, or fundamental analysis of stocks you’re considering buying (or selling), you should join Pat McKeough’s Inner Circle. It’s Canada’s most exclusive investment group.
Inner Circle members always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. We guarantee it. Click here to learn more.
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