Noront Resources

It may go lower, but I started to buy in at $1.10.

I like NOT because:
1. They have an incredibly large resouce estimate
2. Resources not yet been fully delineated
3. Broad range of minerals
4. Located within the 'ring of fire'
5. The government of Canada (and Ontario) want to develop the 'ring of fire' and are promoting it and providing incentives
6. It's at it's 52 week low, which is typical for this time of year due to inactivity.

Concerns:
1. Running out of money to finance further exploration development (risk of dilution)
2. In order to get operational they need a MAJOR partener to assist in funding and development.

Any other analyses?

OK, book value estimate of approx $0.50 per share (taking 200,000,000 shares considering all the unexercised stock options). $0.075 cash book value and the rest is property.

Company is burning through $5-$10 million in cash per year with a current cash balance of $20M. Looks like they just issued $30M in stock recently, so I am guessing they should be OK for at least a year before they have to worry.

Looking through the history of joint ventures, they are offering some pretty high ownership interest to their partners, which the partners have to earn by doing all the work. Noront is paying their own employees in stock options. It is very clever way to conserve cash, I will give them that, but whatever profits they expect to take out of any success will be seriously diluted. Still to me it seems like a smart business model: Noront owns the properties and lets the partners take all the risk in exchange for splitting the profits (if any). I do see some evidence that they are spending some development dollars themselves though, and even take on the role of operator in some of the deals.

One thing I like to look at in companies like this is the stock option exercise price. Nearly half of the 7,000,000 oustanding options have an exercise price below $0.80. I think if you can buy around that price, you are in good shape. The other half of the options have exercise prices from $2-4, so no too much risk of those being exercised soon.

Overall, I think I can support the stock (for speculative purposes anyway) based on the strength of the joint venture business model. I just wish I could get a better feel for what kind of potential their properties have, but I guess that is half of the game with junior miners.

Max, here is the update on the potential their properties have:

NORONT ANNOUNCES SIGNIFICANT RESOURCE INCREASE AT EAGLE'S NEST

Noront is one of my top three picks, both short and long term. In the short term we are awaiting additional drill results from various different properties, expanded resource estimates and most significantly the provincial election which will be unfloding over the next month. The province wants to develop the ring of fire and will likely fight over positioning with the far north, offering various forms of infrastructure development support which will connect the ring to transportation access.

Although NOT is not the biggest player in the ring, they have the largest land holdings and the best ore body. Additionally they have close and positive relations with First Nations, partnership with Baosteel (one of the worlds largest steel makers), the most environmentally friendly development plan in the ring and are drilling on multiple different properties focusing on different minerals. Their recent pre-feasibility study shows they can easily be profitable (within 3 years)without considering the un-proven reserves. They also plan to complete a full feasibility study by early 2012.

Although I believe there is potential for government hold-up on both the EIA front and with respect to the transportation access, it will eventually happen. A sign of this is the recent creation of a government body responsible for managing the development of the ring of fire. This created a number of relatively high level governmnet positions ($100K plus), showing they are not kidding around and want to see it through in the best way possible for the province. There is also potential for First Nations conflicts, but NOT is the most collaborative with them and seeks to incorporate them into their business strategy for the betterment of local communities.

I believe the short term potential related to expanding their resources is largely outweighed by the provincial elections, but both provide excellent short term support for this investment. I will trade 25-40% of my shares on peaks and troughs but maintain a large long term holding, as when the ring actually begins development (possibly 3-5 years), this could easily be back in the $7-10 range. I'm willing to wait five years for a 1000-2000% return.

NOT looking good so far this fall. I averaged down in August at $0.51 and now I'm just over even at $0.81. I'm holding until I see the next news release, although I may sell a portion at just over $1.00. Not sure exactly what to make of it all right now... the last news release was only a few days ago and they outlined a newly discovered high grade chromium deposit, but its been a few days since then and now we are having another run so I expect something is up. I have to say that it feels good to be in the green again after such a long wait. I will update if anything happens.