On Junior Resource Stocks
Michael Campbell: What does it mean for the junior resource market if that’s the case? (from July 31st interview)
Peter Grandich: Well the junior resource market in my opinion, is probably in one of the worst states it’s been in almost the entire time I’ve been around it. I mean given the fact that where metal prices are compared to where they were, juniors in general are probably performing worse now than in any other time that I can remember in a couple of decades.
And part of that is for the reasons you just mentioned funding is difficult it’s not widespread there’s not a lot of money that’s flowing into this industry. Secondly despite the great increases in the Boolean prices we don’t have the same activity the level of people participated in the junior resource market that we used. So and an important part that a lot of Canadians don’t realize day to day because they are not down here in the US. The US market is all but closed for business for junior resource companies. The ability for an average individual down here to purchase or be solicited to purchase a junior resource stock trading up on the Toronto stock exchange has become almost impossible. So there’s not that market that used to exist where a lot of Americans used to play the junior market are just not doing that anymore. So the, all in all it’s a very tough time for the junior resource market despite still very, very attractive prices.
Michael: Yeah I mean I’ve obviously noticed exactly the same thing in terms of metal pricing, where you’re seeing even senior golds trading significantly below where they were when gold was at 700 – 800 dollars an ounce. Now that Gold is $1150 plus I just have noticed there’s been a reevaluation of that the entire sector from seniors down to juniors in that sphere. And I guess one of the things then that tells me to do is check out the companies back to where we were two years ago. Just saying where is their cash financing gonna going to come from if they are in a developmental stage or what have you? I want to know what kind of cash they have.
Peter: You know I think one of the things in the junior market that’s happened is it’s been a [nutrition] market not only among the players and the companies themselves but even the so called experts within, in that community. And part of the reason is there’s just been very little overall success in the junior market. We have really only one or two area plays and I wouldn’t even call them an area play compared to how they used to be 10 or 20 years ago. Most notably now in the Yukon we don’t have widespread interest the hedge fund industry and funds are closing not opening getting into juniors. And the flow through funding you know is still there in Canada and all but it’s not as big as it used to be. So it doesn’t hold well and we see that. We see companies have great news trade up 10% or 15% on that news and two or three days later, all that gain is evaporated. And I don’t see any significant change in that for the foreseeable future. That’s why despite still being very bullish on precious metals and particularly gold, the junior resource market is still a very tough market. It’s not something you can just buy and be successful cause the overall market’s going up.
Update: On Junior Golds and Junior Silvers
by Jordan Roy-Byrne
I maintain two indices for premium subscribers so that we can better track the junior precious metals sector. These four charts should give you a better idea of the current state of the sector. The first chart shows our junior gold index over the last year. The junior gold index consists of 25 companies, most of which are in the neighborhood of $100-$600 million in market cap. How a billion dollar company is a junior, is beyond me.
…..read and view more charts HERE