Stocks I Like - New Millennium Iron

New Millennium Iron (stock symbol: NML) is the revised name for New Millennium Capital. This change is appropriate, since the fortunes of the company are now firmly in iron.

New Millennium’s DSO (Direct Shipping Ore) project in Canada is scheduled to start producing ore in 2012, and ramp up production through 2013.

Of course, mining companies commonly give estimated completion dates for their projects even if they haven’t secured funding, and even if the mine has virtually no chance of ever being constructed. Giving a completion schedule is an old trick to increase the stock price. So what makes New Millennium different?

When a mining company signs up a multinational end-user of their product as a partner, this shows that the property has serious potential. It also means that the project will likely be developed with minimum dilution of shares. When Copper Mountain Mining, for example, announced that it was partnering with Mitsubishi, I bought shares immediately and have been very pleased with the result.

New Millennium’s partner is the massive Tata Group (you may be most familiar with Tata Motors, makers of low-cost cars in India). Tata Steel Minerals Canada has acquired 80% of the DSO project, and has an agreement to purchase 100% of its production. In other words, Tata Group’s industrial companies will be using the iron produced by New Millennium, and have a vested interest in seeing the project’s timely completion.

In addition to the DSO project, New Millennium has other nice properties making up the “Taconite Project,” which contains an estimated 9+ billion tonnes of iron ore. In fact, NML’s total projects are so interesting that Tata Steel has acquired 27.1% of the entire company, and has 3 members on the board of directors.

If you buy NML now, I recommend holding it through every conceivable credit crunch or world disaster until about 2017, since this is when all of NML’s current projects are likely to have been completed and producing cash. Any time after 2017, you have my blessing to sell.

NML promises to be a long-term cash flow giant.

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"Blood, iron and gold promise victory. But even the greatest material resources do not avail, if the human qualities necessary to animate them are lacking."

John Keegan

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For further information, see: New Millennium Iron's official website.
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Disclosure

Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.
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PS - In case any directors from NML are reading this website...

Please don't do the same stupid s**t that so many other mining companies do after they become successful. That is, once you start raking in the cash, do not immediately look for new acquisitions to spend your money on. With estimated mine lives in the decades, you can afford to wait. Pay out dividends instead. Thank you.

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The Sick Man of Asia

In the last few years, Chinese companies have bought out shell companies on North American stock exchanges (mostly the Nasdaq and TMX) to become listed in North America. Buying out a company that is already listed is a quick and easy way to become publicly-traded, without the cost and public scrutiny (due diligence) that comes when being newly-listed. Therein lies the trouble.

If one does a stock screener search of companies with great earnings, great return on equity, low debt levels and low stock price, many of the companies which turn up are Chinese (see list at end of this article). Why are these great companies so undervalued? Why are so many of the undervalued companies Chinese? The answer: they are undervalued because investors worry many publicly-traded Chinese companies may not actually exist.

Last week, Sino-Forest Corporation brought this problem into full view. Once Canada’s largest publicly-traded timber company, Sino-Forest’s stock price has dropped 83% in two weeks, losing 3.7 billion dollars in value to investors. There are allegations that Sino-Forest has vastly overstated its assets, and that many of its trades may actually be to subsidiaries of itself. In other words, the company as stated may not be real.

This is certainly not the first time a Chinese company has seemed suspect. There are multi-million dollar pharmaceutical companies in China which claim to sell hundreds of popular products, yet none of my Chinese friends (even those who work in the pharmaceutical industry) have ever heard of them.

The Chinese problem weighs so heavily on the minds of investors that it extends to even good companies. One of my favourite mining companies, Hawthorne Gold, merged with a Chinese company and changed its name to China Minerals Mining Corporation. Within weeks its price dropped in half. Clearly, having “China” in your company name is like developing leprosy.

The Chinese market - both in the stock market and in real estate – seems to be composed of many empty shells.

Beware.

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Click above to expand
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For further information, see:
Key partner casts doubt on Sino-Forest claim

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