My view is RIM is a speculative stock because it is an explorer...

My view is RIM is a speculative stock because it is an explorer and there is a higher degree of risk associated with that. But the rewards can be many multiples of your stake. Stakes are not investments but a punt. Explorers are also the first casualties in tough times because they usually have no income stream to offset expense and live off their capital. Generally speaking, mines may take 5 years from discovery to production. Then there are the usual interested parties playing the game for easy pickings for us as speculators to contend with. Each to their own.


However the gold and silver discovery was a game changer for me even though I was initially motivated by the platinum resource, something Australia is relatively deficient in, before I investigated the company further. At this stage the platinum appears to be small scale. This too may change given the drilling program. However the gold and silver resource is indicative of large scale in this Greenfield discovery. Some have already commented in detail about the scale of the discovery, the methods of drilling and the externalities inflicted by stresses in the world money supply.

Timing is everything. Had we announced these new discoveries some years ago if we had them, the share price would have accelerated. But there has been ample opportunity to trade this stock or cement a position. So I am treating this stock like any other new potentially large high grade discovery that occurs in tough times. But ask yourself is the bear market about to change in precious metals? I hear China is considering a bullion exchange/warehouse at Shenzhen on the mainland in the free trade zone. I look more deeply at the international ramifications. Is it also linked to a supposed Chinese and Russian move to create an international exchange basket consisting of gold, silver and currencies of USA, Britain, Switzerland, China and Russia? Have Chinese gold consumers surpassed Indian consumers? Of more interest really is what central banks are doing and the strategies behind them so you can position yourself for the long term. This of course depends on if you are motivated by capital gain not income flow and low entry price.

Currently, the issue for RIM IMO, is how to finance for development, (like any other explorer in this economic climate). IMO they have to prove up and value the resource and that is what the company is doing or sit on its resource and not bleed cash until the timing is right. The shares are cheap to hold.

If we are pointing in the right direction, the timing for a breakout in the price of gold will be the main driver. This has occurred and looks like being sustained with gathering momentum IMO. If you trade the technical, then the volatility can be profitable. If you trade the long term trend in gold with a core holding, then, gold has not broken trend. It has bottomed in the channel and is now rising up.

Profitability will greatly assist a case for finance. With that will come development or a partner or a predator because profitability, not a punt has been assessed. If you have a propensity to buy big chunks the price is right to cement a position IMO. Or you may feel safer in hard assets or in established gold producers if precious metals are your special area given the current international turmoil which drives prices. It all depends on your appetite for risk and you have to be convinced the story is real and not a source of salary or fee for those people who fleece the sheep or need funds just to keep the lights on. The most profitable stage for a trader IMO is the transition period from explorer to producer if this is feasible because prices are influenced by expectations and not precautionary demand assuming the world sector market is trending up. Weak companies tend to be dragged up by the index.
There are very few Greenfield discoveries that have demonstrated these high grades that RIM is establishing. Grade is king and add that to the low cost extraction of disseminated gold close to surface for enhanced profitability, then it is a real prize and sure beats high grade narrow vein which is hard to track and mine and is often lumpy and deep. Perhaps there remains the discovery of a large source of this disseminated mineralization or other mineralization profiles but what they are discovering is sound IMO. So the question has to be answered, how much resource have we got?

I would also like to think smart operators have learned much from the financial mistakes a number of companies in this sector have made in recent times, from the lack of proper planning, negotiation with bankers, employees, contractors and stargazing. Those who trade this sector know who I am talking about. Some of those big companies and some not so big had managers and directors claiming huge salaries and fees and some directors played with margin loans that burnt them and did not deliver promises yet to the public it looked like a positive spin as directors were buying. RIM has been transparent in IMO thus allowing buyers to be better informed for better decision making compared to massive losses inflicted on shareholders by some other darlings of the market. But it remains buyer beware in this game.

I think the finding of high grade gold will not need a smack to focus attention. The prudent management of scarce funds in this economic climate and methodical approach to drilling appears to be this management's approach. But I admit I am wary of a shotgun approach to discovery with too many programs. I would like to think a proper swot analysis and opportunity cost have been done by management. I am a great believer in building on strengths in a strategic approach and not wasting capital through widening approaches. If there is no profitable market diversification will not save you. You have to be in the right business at the right time. You have to constantly ask yourself, “What business am I in?” to survive and prosper. Is it diamonds, uranium, precious metals etc? Unless it can be proved otherwise, you will be just be another on seller operating on small margins and unable to survive the big hits and paradigm shifts.

Having tuned up my bulldust detector with other companies like so many of us have in the last couple of years, we all need to keep management and directors on task by asking questions and voting and raising issues as shareholders because we are part owners. The legal framework has changed to allow us to do this and it is our money.

For my own protection, I have decided to keep a database of directors, managers and secretaries of damaged/failed companies in this sector for my own personal use and if I see that name or an associate I will keep well clear of their new ventures. Due diligence has new meaning and it is amazing how small Australian networks really are. The days of a nod and a wink are gone but what the comedian Jerry Lewis used to say, “There is a sucker born every day”, remains with us today.