Long slow summer for YLL
I think its going to be a long frustrating summer... and then what... we get October!!
YLL is getting zero attention and the markets are looking precarious.
How to know when to buy will be the difficult decision. I don't think its now.
If we have financial implosions of Greece, Spain and Euro what is going to happen to the Venture market?
I thought this was interesting... though not necessarily promising for junior explorers.
pub/na/9910
The Gold Report: The performance gap between equities and their underlying commodities has been especially noteworthy with gold. Brent, you wrote recently that the gold price has outperformed mid-tier gold mining stocks since 2005, with the price of gold up 190% versus 70%–90% for gold equities. Is this because investors can buy gold more easily now, or are some systemic reasons behind the equities' underperformance?
Brent Cook: Several dynamics are involved. Certainly one is that you can now buy gold through exchange traded funds (ETFs). That is a very simple bet on the gold price that does not carry all the baggage that comes with mining the stuff. That baggage includes the almost universal underestimation of development and mining costs published by mining companies, engineering firms and equity analysts. Capital costs are rising sharply due to the basic increase in cement, steel, fuel and everything else that goes into building a mine. Production costs are going up for many of the same reasons, plus rising labor costs. Qualified and experienced people are hard to come by and overworked. The result is lower-quality engineering studies and misses on cost estimates.
Additionally, with the higher gold price, companies are mining lower-grade ore, which cuts down on margin per ounce produced. Then, we have the almost continual issuance of stock whenever a brokerage firm sees a chance to make a commission. From my dealings with value-oriented funds, this continual dilution from mining companies has been very frustrating and perplexing. Given everything I mentioned, it's not hard to see why the leverage we expected in gold equities at a $1,500 price hasn't materialized.
TGR: So, will we ever see the leverage?
BC: Now is probably a good time to look at mid- to large-tier companies that have good production profiles at the lower end of the production cash costs and high cash flow per share.
TGR: What's your opinion on that, Rick?
Rick Rule: With regard to the juniors, everybody looks to the 1970s as the analogue, when we had that huge parabolic rise. That won't happen again. We won't see the circumstances we had in the mid- and late-1970s, when there was a shortage of stock. The industry now has the infrastructure to print paper—stock certificates—faster than demand can ever develop.
Brent nailed the reasons for the underperformance. People don't have to invest in gold stocks; they can invest in a gold proxy in the stock market. The underperformance has been disgusting, frankly, and investors are punishing the industry deservedly. The basic product going from $250–$1,500 an ounce without margins going parabolic is truly sick.
TGR: Given that, why should anyone invest in a junior at this time?
RR: Performance in the junior sector takes place in a very small subset; 5% of them deliver 90% of the performance. The performance delivered by that 5% is so spectacular that it adds credibility to a sector that, otherwise, would have none. People who have access to information, who subscribe to services such as
The Gold Report or Brent's
Exploration Insights, can do very well because performance is simply a factor of segregating—not buying the sector, but buying the best companies.
TGR: You've both talked about being more selective with juniors. And Brent, you've indicated that many investors go in without even really knowing what the geologists are saying. But geology is science; how can a lay investor really understand the difference between a real ore body and moose pasture?
BC: To get an edge, you have to go to someone who understands what a drill hole means, what an ore deposit is and isn't and, most importantly, when it is and isn't an ore body. It's really important to have advice from your broker, a newsletter writer or someone in the industry that has the experience to judge a property and the people running a company.