Q: Typical scenario where I was at a party and a guy recommended this mining stock based on their second mine in Mexico starting full production in the near future. Has your view on this company softened any?
5i Research Answer:
Risk is still high here, due to its size, potential start-up issues and debt. While a second mine is always good, it is often better to wait until it is clear there are no start up issues, especially with a small company. Cash flow has turned positive, which is good. It has recently restructured its debt, which really helps the financial picture, but came at a cost of dilution (it issued shares for debt). The stock momentum has been negative. Overall, we would still be cautious. But as the mine hits full production risk should be reduced somewhat, which might create more interest. Still, it is a tiny company that ran into debt trouble, within a somewhat struggling sector.