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Nimmmm

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  1. Howard Sun on why Junior gold miners have not yet come to life: http://seekingalpha.com/article/71200-why-..._bar_long_ideas Summary: "1. Rising production costs – it is becoming increasingly more difficult to extract gold. This increasing difficulty coupled with the high energy intensive production has made it more expensive to mine this precious metal. For junior companies, this becomes even tougher due to the lack of scale economies. In addition, the weak dollar has eroded profits for many North American companies (the US is the world’s third largest producer, next to China and South Africa). For example, Gammon Resources (GRS) saw a net loss of $44MM in Q3 of 2007 despite skyrocketing prices. 2. Increasing popularity of ETFs – The first gold exchange-traded fund GLD was launched in 2004. ETFs make investing in gold easy and cheap; in addition, ETFs reduce mining risks, company risks and country risks. GLD has gained immense popularity with investors; it is now the eighth largest holder of gold in the world. This popularity will only increase as investors seek more diversified investment vehicles. 3. Growing fear of recession and the credit crisis – Junior mining companies tend to be more volatile and more speculative than established companies. The recession has changed many investors’ psychology, and the appetite for speculation has certainly seen a dramatic reduction. As a result, investors are staying away from the more speculative junior stocks. 4. Majority of juniors are speculative exploration companies and are not producers themselves – Exploration companies do not produce gold, and are unlikely to benefit from the surge in gold prices. It’s important to note that a majority of junior companies on the stock exchanges are classified as exploration – they do not have the capital or the skills to produce and process the gold themselves." He concludes: "The question on everyone’s mind is whether or not juniors will experience the same surge in stock prices as experienced by gold and many senior companies. I think the answer is likely to be yes. With the state of precious metals continuing to be wildly bullish, right now is the time to pick up shares of junior companies as they are tremendously undervalued. When the uptrend begins, it’s going to be over very quickly due to the low prices and relatively high volatility of these companies. The prudent investor will have a portion of their portfolio dedicated to junior companies to ensure that they’re ‘in the game’ when the time comes. Although this is a speculative play, the odds for these companies look good; and with sound analysis, you might just be able to pick the next ten-bagger."
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