patersons stockbroker on yrr

This is an up-date on an email I last sent in mid-December 2012 on several exploration companies that I follow. I prefer to look for companies trading near their 1 or 2 year low with an active or planned exploration program. My preference is to accumulate stock prior to drilling commencing in anticipation of a potential price rise as the markets expectation of a positive exploration result increases.
The logic of accumulating when the stock is ‘quiet’ and low will sometimes give you two opportunities to make a profit:
1. Rise in the stock price as drilling program is underway – this doesn’t happen will all companies but if management broadcasts their intentions it assists in attracting buyers to the market
2. If there is a discovery there is a chance the stock could race higher – obviously there is a risk holding until the announcement, if the results are poor the price instead falls
The risks associated with this type of investing are
• poor exploration results – often resulting in negative price movements,
• low cash reserves – many of these companies have less than $2 million in cash, and illiquidity
• lack of tradable shares making it difficult to exit your investment
However if you have exposure to the right company and are patient you are sometimes rewarded.

Yellow Rock Resources – ASX Code YRR – last traded at 1.3c - a stock I have mentioned in previous emails – at this price this has the potential for some exciting activity.
Yellow Rock has recently received results and from an induced polarisation (IP) geophysical survey on their Gabanitha project 43km SE of Meekatharra announcing to this to the market yesterday. Combining survey results and surface sampling the company has identified drill targets is planning a drill program to test these targets.
Yellow Rock is following a similar process to Rox Resources (RXL) prior to its recent discovery which sent the stock to 9.9c - RXL was mentioned in my emails in November prior to drilling commencing at 1.6c and then in December after their discovery at 2.2c
For more details on the YRR exploration project see the attached company announcement.

Rox Resources – ASX Code RXL – last traded 6.3c – next drill program expected soon.
Following the company’s Nickel discovery in December the management has conducted new surveys on their Mt Fisher project – south east of Wiluna Western Australia- and are planning a follow-up drill program. The stock price has been in a holding pattern for the last few weeks in anticipation of drilling being announced and possibly a capital raising to fund future exploration.

Sipa Resources – ASX code SRI – last traded 9c – update expected soon on drill program

Horseshoe Metals – ASX code HOR – currently trading at 2 year lows – last traded 15c
To-date HOR has generated some spectacular results but needs to continue making discoveries and adding to their current resource base – this is definitely another stock to watch.
If you have any questions regarding these companies or others do not hesitate to contact me
Ken Tomczak
Private Client Adviser

D: +61 8 9225 2815 | F: +61 8 9325 6452 | E: [email protected] | W: www.psl.com.au
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