There is no explanation for how crazy Mr. Market has gotten when it comes to the mining stocks. These companies report good drilling results. Who cares? They improve their operations. Who cares? They report good numbers. Who cares? They have good properties. Who cares? They have cash in the bank. Who cares? One of these companies trades for a P/E ratio of 1. Who cares? Nothing matters.
Recently, I was paying attention to Oroco Resources Corporation (OCO) because one of the companies that I own, Goldgroup Mining, came out with a press release stating that they intend to buy one of Oroco’s properties. I don’t own Oroco and I am not planning to buy it but this post is just to show you how crazy things have gotten.
Oroco owns two projects: Cerro Prieto and Xochipala Project. Goldgroup will pay Oroco $18 million for Cerro Prieto Gold Project. Oroco will keep Xochipala Project, which is its flagship property. Now, get this – Oroco is now trading for an enterprise value of $13 million ($9.5 million market cap plus $3.5 of debt). So, Goldgroup is paying $18 million (which is extremely cheap) for Cerro Prieto while Mr. Market is saying that both Cerro Prieto and Xochipala are both worth only $13 million. I don’t even know what to say to this.