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White Cliff Minerals Limited (ASX:WCN) shareholders should be happy to see the share price up 25% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 99% in that time. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
View our latest analysis for White Cliff Minerals
With just AU$7,175 worth of revenue in twelve months, we don't think the market considers White Cliff Minerals to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that White Cliff Minerals will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some White Cliff Minerals investors have already had a taste of the bitterness stocks like this can leave in the mouth.
White Cliff Minerals had cash in excess of all liabilities of just AU$49k when it last reported (December 2018). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 63% per year, over 5 years. The image below shows how White Cliff Minerals's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how White Cliff Minerals's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.