Picking a Junior Gold Company in a Bad Market

Posted by Richard (Rick) Mills: Ahead Of The Herd

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The current investment market for junior gold companies is arguably one of the worst since the United States went off the Gold Standard in 1971.

Despite the current high price of gold (and many other commodities), investors have almost abandoned the junior gold mining sector to invest in physical bullion, ETF’s, and producing companies. The value of the TSX-Venture Composite Index, shown below, is similar to what it was in the early 2000’s when the price of gold was below US$300 per ounce. 

In 2013 I expect to see the equity market in the junior gold sector begin to correct itself and investors should currently be taking advantage of the investment opportunities resulting from the severely beat up junior sector. There presently exists a great opportunity for those investors who are “ahead of the herd” and want to invest in the market at or near the bottom. 

TSX-V Composite Index 10 Year Chart

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The Venture exchange is down over 50 percent from its March 2011 high.

The questions become – How does an investor take advantage of the dislocation in the junior markets?  What might be a good junior to have on our radar screens?

image004Investing in junior gold miners is a speculative business at best, with risk on the downside but the potential for significant reward on the upside.

Two ways to mitigate risk for investors is to buy at market bottoms and have a long-term view of their investments to take advantage of a company’s increasing value as its projects move through exploration and development while markets recover. Ideally, the pay off comes when a project is brought into production, gets joint ventured, or is sold by the junior. 

So in this environment, companies should have the following key attributes:

  • Established track record
  • Experienced and competent management teams
  • Established mineral resources
  • Projects in safe and stable jurisdictions of the world
  • Strategically located properties – existing infrastructure
  • Significant upside potential

….if you are interested in a company Richard has selected according to this criterea, read more HERE