The art of stock picking is identifying undervalued gems where the news flow is positive, yet the share price is failing to reflect progress.
Impediments to this forward momentum are often quite obvious: they are usually funds, or funding related. Fashion and fad also play a part.
However, there are occasions where the valuation gap is inexplicable, proving definitively financial markets are neither rational nor efficient.
A number of anomalies
The UK’s junior mining sector has thrown up a number of these anomalies. Most are gold prospectors and diggers, although this is not exclusively the case.
A glaring example is Ariana Resources plc (LON:AAU), which, after covering the hard yards required to get a mine permitted and built in Turkey, is now producing the yellow metal from its Red Rabbit operation.
Okay, output is modest at 10,000 ounces (expanding to 25,000 ounces), and it shares the proceeds from sales with local partner Proccea; however, one would have expected the share price to have appreciated as Ariana moved from the construction phase into production.
The rising price of gold, which is once again back above US$1,300 an ounce, should also have provided a tailwind.
Instead, the stock has been in reverse gear and has fallen around a quarter in value over the last 12 months.
While a more than doubling of the share price of Azerbaijan-focused gold producer Anglo Asian PLC (LON:AAL) suggests the market is up with events, this may well be the amuse ouche before the starter, main course and dessert.
Why? The cash it is throwing off is quickly eroding the firm's debt pile, which was over US$33mln in March 2017 and was down to around US$10mln 12 months later.
Output was better than expected in the first quarter and is set to rise by 16% this year to around 84,000 gold equivalent ounces.
In common with Ariana, it has some fairly interesting exploration upside.
But it's also easier to see why this investment may not be to everybody's taste, particularly if one is not familiar or comfortable with Azerbaijan.
Worth mentioning too is the profit-sharing agreement Anglo has with the government, which will certainly put some investors off.
Praise should go to Dan Betts and his team at Hummingbird Resources PLC (LON:HUM), which is now producing from the Yanfolila Gold Mine in Mali.
It expects to mine around 110,000 ounces this year at around US$700 an ounce, which should make the operation supremely cash generative.
Not just that, there is the potential to extend the life of the mine via a high-grade extension, while the sleeper in the portfolio is Dugbe project, which, at 4.2mln ounces, is Liberia's largest gold deposit.
The share price has nudged up a little – around 4p to 30p, which values Hummingbird at just over US$130mln (£100mln).
But peer comparison reveals on most metrics, the company's shares are still significantly undervalued.
Perhaps this discount rating will start to unwind once Hummingbird gets a few more months of production under its belt.
Gold in the Scottish Highlands
Finally, one to look out for is ScotGold, which recently raised the US$12mn (£9mln) required to get the Cononish Project up and running in the Scottish Highlands.
Investors tipped in, but around US$6.6mln of the funding is coming by way of a secured loan provided by the spread betting multi-millionaire and chairman Nat le Roux.
On a world scale, Cononish will be a minnow, churning out just 23,500 ounces of gold a year.
Small it may be, but the project also perfectly formed, generating life of mine earnings of up to US$133mln (£100mln) at a gold price of US$1,150 (in other words well below the current price).
The net present value of the project, meanwhile, is anywhere between US$30 and US$60mln – which represents a significant premium to ScotGold's current market value of US$12.6mln.
Spotting the opportunities first
So what do we make of this? Well, it's fair to surmise that small-cap gold producers or near-producers are flying under the radar. But it's not just restricted to gold.
Fledgling explorers and developers across the industry with good stories, reporting significant, positive progress are being overlooked.
Meanwhile, funding for decent projects is starting to become more readily available.
The imponderable here is just how long it will take the institutions and family offices to catch up with the smart money that's already spotted the opportunities.