Tracking Junior Miners - Why Are they Underperforming?

[1waving]

Major Companies Certain to Target Juniors in Search For New Resoures

 

Author: Jim Sinclair

 

Dear CIGAs,

 

With the world's mineral resources being depleted by unprecedented demand from developing nations, mining companies and end users are desperately looking for new sources of supply.

 

That being said, is it any wonder that some of the most pre-eminent names on the global mining scene (Homestake, Placer Dome, Inco and Falconbridge to name a few) have simply disappeared - gobbled up by competitors who realize that buying mineral resources on the open market is a lot easier than discovering the resources themselves.

 

Given the high capital cost and risk associated with exploration in virgin territory, most of these predatory companies are looking closely at established mineral belts where mines have been found and are still being discovered. It's not rocket science but just common sense.

 

What we've seen so far on the merger front is only the tip of the proverbial iceberg. In the coming years, companies with good land positions in the world's most prolific mineral belts will reap the rewards of their efforts at premiums that will shock you by today's standards. In fact, the targeting process is happening as I speak.

 

 

Mega mergers ahead for mining industry

Fri Apr 11, 2008 6:13pm BST

By Ignacio Badal - Analysis

 

SANTIAGO (Reuters) - With metal prices holding in what many call a super cycle, the global trend toward mergers and acquisitions will continue among miners, according to analysts and executives who attended the CRU/Cesco copper week in Santiago this week.

 

Small and medium-sized miners, and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisition wave won't likely stop there, they said.

 

 

 

.

 

 

[drbubb]

WHAT IS A GOOD PROXY for the CDNX?

 

Endeavor Capital has been tracking it more and more closely

 

EDV.t vs. CDNX ... update

Weekly EDV

[cbs7]

WHAT IS A GOOD PROXY for the CDNX?

 

I came across some excellent bespoke junior gold, silver, energy and other indexes here

 

http://www.smartinvestment.ca/junior_indexes.html

 

These are compiled over at this forum

 

http://www.mexicomike.ca/php/phpBB2/viewforum.php?f=21

[chazza]

Put some more into a juior/mid fund after picking the top a couple of weeks ago.

 

The juniors seem to be performng fairly well against both the S&P and gold recently, maybe the creamy filling will be just what it needs.

 

Also on the few junior charts i look at the MA's look to be trending in the right direction, etc...

 

Notable break through for RGLD of 32$?

[drbubb]

SVE invests in juniors (very junior - pre IPO and some on the PLUS market)

"Starvest plc is a United Kingdom-based company engaged in investments in small companies new issues and supporting of pre-initial public offering (IPO) opportunities. ...

If the SVE discount stays near 45% arent the shareholders better off winding up the company and asking for their money back ??

 

You would have thought so.

But on second thought, it wont be so easy. Many of those positions are highly illiquid, and if they started selling to realise

cash, prices would fall, perhaps dramatically.

 

[drbubb]

FOOD FOR THOUGHT - from the Depression 2010 thread...

 

Questions:

4) If people believe in hyperinflation why would they suggest to hold any money related assets of any kind such as gold/silver juniors, energy stocks, etf’s. Or do the people that recommend such holdings (Jim Puplava etc) not believe in a hyperinflation scenario?

I am not sure what you mean by "money-related"?

These are commodity-related equities, and their price (in dollars or pounds) will to an important extent depend upon the value of the underlying commodity. This is particular true of the major producers. But, as we have seen, less true for those junior companies that are still exploring for commiodities, and need to raise big finance before they can put a mine or an oil well into production. The Juniors are exposed to the conditions in the debt market, and are therefore a less direct play on teh commodity. To get a rally in the Juniors, we need to see an easing of the debt market, or evidence that the senior companies are buying the juniors as a way to "build their pipelines" of future projects.

 

[jerpy]

Just noticed a preliminary approach in for Mercator Gold.

 

Riggers

 

p.s strong suspicion it was shorted down.

[drbubb]

Getting ever closer to a possible "pinch point"

 

Markets often show big moves out of such formations

[drbubb]

Here's the last part of an intersting write-up from Jordan Roy-Burne:

 

"It is important to remember a few things. First, corrections always have three legs. There is the first leg down, then a recovery and then the final leg down. So it is unlikely that the current correction is complete. Secondly, gauging sentiment is an art form. It is not an exact science. There are many different ways to analyze sentiment, and the HGNSI isn't the be all or know all. Nevertheless, it has a good record as a contrary indicator. The most recent HGNSI of -17% is an important indication that, despite a roaring gold market, sentiment is quite less bullish than you'd expect. If gold declines further, sentiment from a contrary viewpoint is likely to become more favorable to the bulls.

 

Conclusions

 

+ Looking for Gold to bottom at $840 from late May to mid June. $790 to $800 is a realistic worst-case scenario.

+ Sentiment, from a contrary perspective is in better shape today than it was following the peak in May 2006.

+ Gold shares will bottom before the metals and lead back up

+ Small and Microcaps (Juniors) will lead the HUI, XAU & GDX

+ Silver will strongly outperform Gold

 

/MORE: http://www.safehaven.com/article-10057.htm

 

his charts and indicators are well worth a look

[Havoc]

Who was it who said recently that junior mining stocks are now like "The bald-headed step children"

 

I will try to find the article.

 

Anyway could it be that the reason why the juniors are doind so badly now is because there are so so so many of them and the investment money has to be diluted accordingly? We hear these amaizing stories about Lion Gold for instance turning $5000 into several millions over the course of the 1970s, but was it just because there was less choice back in those days?

 

I certainly wish there was less of them, it would make buying much easier.

 

 

[drbubb]

THE RELATIVE STRENGTH in CDNX is encouraging.

 

And some of my Juniors are starting to "rock and roll"

 

New Island / NIS.v

Good Close, on decent volume

 

$0.26 Change: +0.05

Open: 0.205 High: 0.26 Low: 0.205 Volume: 381,650

Percent Change: +23.81%

 

 

Saturn Minerals / SMI.v

After languishing in the teens, this one has come alive

 

$0.42 Change: +0.08

Open: 0.35 High: 0.425 Low: 0.29 Volume: 7,240,800

Percent Change: +23.53%

[polo]

some interesting statistics on the performance of sseveral types of gold stock and a somewhat gloomy prognosis

http://www.mineweb.com/mineweb/view/minewe...0&sn=Detail

Gold stocks take pounding in a bear hug

Leave aside rambling gold prices, and consider how very poorly listed gold stocks have been performing. Author: Barry Sergeant Sunday , 04 May 2008

Since early March, when the dollar gold bullion price spiked to $1,030/oz, listed gold stocks have taken a pounding, with an average loss of about a third for each of 75 selected gold stocks listed around the world. Even Barrick (ABX US, $37.56 a share), the world's biggest gold producer, has..............more

[gwizzie]

Could rvd now be classed as a junior?

 

 

[HollandPark]

Could rvd now be classed as a junior?

 

SURE. But diamonds are a tough business. Not many long term winners there.

May fav, Firestone, is one of the few

 

I notice that Royal Gold is behaving well today:

RGLD : $28.47 Change: +0.83 Open:

Volume: 69,318 // Percent Change: +3.00%

 

 

 

 

[gwizzie]

SURE. But diamonds are a tough business. Not many long term winners there.

May fav, Firestone, is one of the few

 

I notice that Royal Gold is behaving well today:

RGLD : $28.47 Change: +0.83 Open:

Volume: 69,318 // Percent Change: +3.00%

Sorry...did you clicky de link? I was referring to the first gold pour at their Vatukoula mine

[1waving]

From Jim Sinclair today:--

 

Dear CIGAs,

 

I know more than any other writer on the consolidator subject.

 

The Consolidator has made every effort to dress up as the quiescent producer.

 

Now the Consolidator has joined the Asians and Middle East in competition to consolidate the junior production and exploration industry.

 

This is fact. Believe me I know.

 

The stockholders of the junior exploration and production companies do not, nor do they believe this is the real reason behind the depression in prices.

 

The Consolidator is out there shopping hard.

 

Regards,

Jim

 

----------

 

Jim can be quite cryptic but with his statement 'That is fact, believe me I know ', I think he does.

 

I doubt it will be long before the consolidation becomes very apparent.

 

 

.

 

 

[Pixel8r]

From Jim Sinclair today:--

 

Dear CIGAs,

 

I know more than any other writer on the consolidator subject.

 

The Consolidator has made every effort to dress up as the quiescent producer.

 

Now the Consolidator has joined the Asians and Middle East in competition to consolidate the junior production and exploration industry.

 

This is fact. Believe me I know.

 

The stockholders of the junior exploration and production companies do not, nor do they believe this is the real reason behind the depression in prices.

 

The Consolidator is out there shopping hard.

 

Regards,

Jim

 

Does anyone have any idea to who this western "consolidator" is?

 

[Havoc]

Does anyone have any idea to who this western "consolidator" is?

 

It has been written a few times recently that several hedge funds have shorted the juniors into the dirt so that they can be picked up on the cheap.

 

This would then make it appear that these funds are acting on behalf of the majors who are going to be doing the shopping (for the resources). Why would they do that I wounder?

 

Unless of course they themselves are going to be doing the buying.

 

 

......See you up there.

[Havoc]

Well would you believe it, after a long winter of discontent it looks like our beloved juniors may now have finally put in a bottom.

 

Article

 

 

[1waving]

From an article by Jim Sinclair on May 1st:-

 

On the 8th of May interest will increase in junior precious metals shares. This interest will first be in the most meritorious issues.

 

----------------

 

Whether the western Consolidator is a single or multiple entities it is important that there will be competition from Asia, China and elsewhere.

 

The real question is who is going to get consolidated and will the first deals be on the cheap ??

 

From that May 1st comment Jim has been in the know for a least a week so it's time to look for the most meritorious issues - Suggestions ??

 

 

 

[drbubb]

Jim S. could be right

 

I like the look of today's action.

What's driving this? Any explanations?

[GTG]

Jim S. could be right

 

I like the look of today's action.

What's driving this? Any explanations?

 

A correlation rather than an explanation but here's Jordan Roy-Byrne's observations with regard to gold stocks in general (he's assuming oil has reached a top)

The conclusion though couldn’t be clearer. The last four tops in Oil occurred almost simultaneously with bottoms in the Gold/Oil ratio, which correlates strongly to the performance of gold stocks against Gold.

http://news.goldseek.com/GoldSeek/1210272631.php

 

I'm looking to get some exposure to the juniors without buying the individual stocks, would it be a good time to buy into Endeavour EDV.T?

[drbubb]

CDNX is coming into a very interesting "pinch point" ...

 

...and I think the next move is going to be up.

 

I like;

GROW's USERX, EDV.t, PNP.v, and maybe LV.v for those that do not want to pick individual stocks

 

GROW is an individual stock, but not a mining company. They manage diversified funds,

including two big resource funds:

 

GROW's Resource Funds

============

 

Natural Resource Funds................ --Size-- Inception.. : Yr. t.d. : 1 Year : 5 Year : 10 Year

======================

UNWPX : World Precious Minerals.. $1.06bn 11/27/1985 : +1.18% 24.70% 38.60% 14.70%

USERX. : Gold and Precious Metals $275mn 07/01/1974 : +8.37% 32.72% 34.40% 14.63%

PSPFX.. : Global Resources Fund... $1.56bn 08/03/1983 : - 5.49% 28.38% 43.12% 18.63%

 

 

Any of the above could be a good investment in the current market,

if I am right, and Junior miners are about to run.

In the past, the Resource funds HAVE LED jumps in GROW's share price

 

All their funds : http://www.us-global.com/fund/quarterlyreturns.asp

[frizzers]

I know AIM is sh*t. You know AIM is sh*t.

 

But a number of AIM resource juniors have really started to fly in recent weeks: among others Emed, Firestone, Caledon, Gulfsands. I think this bodes well.

[drbubb]

YES.

And it bodes particularly well for holders of Firestone Diamonds (FDI.L) share- of which I am one.

 

Weekly Chart ... update