Thursday, March 31, 2016

Richmont Mines Hangs In For Long Haul

I am impressed with Richmont Mines (US ticker RIC). Their longevity and profitability in 2015 were rare in a junior resource producer. The main challenge ahead is to replace mined reserves, either with new discoveries or with better engineering to make discovered resources viable.

The management team must be doing something correctly. Their mining engineer CEO has been around other producing companies. It's nice for once to see actual mine operators running a mining company instead handing the place over to former consultants or investment bankers. Their other key people have been around the block in the mining sector for a while.

The company has two active mines in Canada, plus other properties in various stages of exploration and development. The PEA for the Island Gold mine and the latest 43-101 for the Beaufor mine are on Richmont's website. My problem is that the PEA is abbreviated and the 43-101 is in French. Someone in charge over there needs to show me the long forms in my own language. I prefer to examine complete primary source documents in English. I am going to take the company's word that independent parties have verified its 2P reserves and ore grades.

Results in recent years aren't stellar compared to the larger world economy, but are probably better than countless mining companies facing bottomless financial holes during a bear market for metals. Profit margin at 4.72% (from Yahoo Finance today) isn't great, but plenty of resource sector investors would like to see that kind of money after holding other beaten-down mining stocks. Check out Richmont's numbers at Reuters. Its five-year EPS growth rate of -18.39% shows that even solid operations can't hold back a bear market in metal prices. Its five-year ROE and ROA are both below one percent, which are also below their industry averages.

Richmont Mines is somehow surviving when its larger competitors are struggling and the sector's juniors are cratering. Someone has to occupy the middle of the market.

Full disclosure: No position in Richmont Mines at this time.