Expert: Steven Taylor - 7/2/2009

Question
does the fact that rocmec always carry a zero balance make you concerned about this development mining company who has a patented mining process?

Answer
Randy, I don't follow Rocmec so I can't give you any specific comments about the company. However, I work with many exploration and development companies, and the toughest job that management has may be raising funds and managing money. Since these companies (usually# have no or only limited revenue, they are in constant need of funds to keep business running, and usually the only option open to them is through the sale of common stock. Different companies have different programs on how they raise money. Some companies are constantly raising money - whoever knocks on the door and wants stock, they get it. Some only raise money when times are good #and the stock price is high) and then hope that when they next need money there will be someone willing to step up and buy. And, some only raise money when they need it in order to minimize the dilution of the stock, but usually companies that do that have a group of investors willing to put up money whenever they need it.

When evaluating an exploration or development stage company, I always review management's pattern for raising money and how they spend it once they have it. I keep an eye out for changes in the pattern, as that may be a future sign for money trouble coming down the road. It is also worrisome when the share price drops below 10 cents, as that makes it more difficult to finance. The TSX Venture has extended temporary rules to allow for new financings at an issue price of under 5 cents, but that has only helped some companies, as there are not many investors willing to pump money into a company at single digit prices.

Does a company having little to no cash concern me? Absolutely. BUT, as I described above, it is not necessarily a deal breaker, depending on their historical source of funds and their ongoing cash needs.