RE: RE: Financial Post article picked up some more at 68 today. all the reasons the world was focused on safe haven investments are still with us -- i for one fully expect the EU to print or monetize at least another half trillion euros this year, bernanke has already suggested that easy monetary policy is here for a while...nations feel like they know how to handle inflation so they will inflate and deal...they are very scared of deflation taking hold and will do everything in their power to prevent...hence inflate. real interest rates in north america and europe are negative -- all good for precious metals.
the market is absurd these days and we are in the dog days of a resource cycle now in the market that does not favour metals. energy, ags etc. here is something to consider -- Barrons on-line actually had an article today suggesting that agnico eagle is a good buy now...so we are so depressed that even barrons is noting the extreme disconnect between opportunity and risk.
https://business.financialpost.com/2012/03/29/why-investors-hate-junior-golds/
It is no secret that gold equities have badly underperformed the price of bullion itself in recent years. Senior producers are struggling because of rising costs, operational problems, competition from ETFs, and a simple lack of confidence that current gold prices are sustainable.
If anything, junior gold miners have done even worse. They are being dragged down by a lot of the same factors as the seniors, but there are problems unique to the juniors as well. In their “Junior Mining Weekly” report, analysts at Canaccord Genuity put together a list of them:
Too many companies: The sheer volume of junior gold companies makes it hard for the quality names to get noticed.
Too many low grade deposits: High gold prices allow companies to lower their cut-off grades and add lots of ounces to low-grade deposits. The problem with this strategy is that capital cost requirements go up as well, a big issue for cash-strapped juniors.
Over promote/under deliver: There are some recent cases of discoveries that started out strong, got heavily promoted, and fizzled out. OK, there are some not-so-recent cases too.
Too much spending/overhead: The analysts wrote that management teams “have not exercised sufficient caution” as market conditions changed. They burned too much cash, and ignored financing windows because they did not want to issue equity when their share prices were weak. Now many of their balance sheets are running low.
A lack of genuine world-class discoveries: Nothing new here. High-quality gold discoveries have been scarce for a long time.
A lack of M&A: Senior producers have shown little interest in acquiring juniors over the last several months. That has removed the takeover premium from companies that were once considered likely targets.
To sum up, the analysts noted that this is not a time when a “rising tide will lift all boats.” Instead, investors should focus on junior gold miners with proven management teams, strong balance sheets, and promising land packages in low-risk jurisdictions.