Consider Speculating in Aura Minerals

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Source: http://www.flickr.com/photos/teubig/

While every investor knows the adage “buy low and sell high,” it astounds me how overvalued and how undervalued some assets can get, and how people justify this clearly irrational valuation. Over the past couple of years there have been and continue to be some extraordinarily mis-priced assets. Many of the undervalued stocks that I am familiar with are in mining companies.

With metal prices falling and production costs rising, there is no doubt that mining companies have lost intrinsic value over the past couple of years. But there is a point at which the value potential becomes too great. Nevertheless, investors continue to sell off the shares for no apparent reason other than that they fear additional weakness in the prices of these stocks. These situations make for incredible buying opportunities.

One such opportunity is in Aura Minerals (OTCMKTS:ARMZF). Aura Minerals traded at $10 per share at once point in 2008. It, too, suffered from falling metal prices and rising production costs, and it had the added burden of owning two gold mines in Brazil that are on the verge of shutting down either later this year or early next year. As a result, the company did lose intrinsic value — and a lot of it. But the market was ruthless in dragging the shares down to a September 30 low of just 7.5 cents per share, meaning that the shares fell more than 99 percent.

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