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Juniors held hostage by negative gold bug narrative
A panel of high profile speakers said the junior mining sector is heavily influenced by a negative bias that was expected to lift gold prices from current levels.
Financing trouble in the junior mining sector has cast a chill over this year’s Prospectors & Developers Association of Canada mining conference, raising fears that many companies will soon disappear.
So it’s no surprise that the PDAC organizers should invite a high profile panel of experts to discuss what can be done to revive the junior sector.
Moderated by Salman Partners senior mining analyst Ray Goldie, the panel featured Sprott Asset Management CEO Eric Sprott, Dundee Corp. President and CEO Ned Goodman, and Kaiser Research Online editor John Kaiser.
Speaking to a packed lunchtime audience, Kaiser said the sector is being held hostage by a gold bug narrative that forecasts an apocalyptic collapse of the global financial system.
“It’s chaos out there, I don’t know where the tipping point is going to be,’’ said Sprott.
This may be good for precious metals, he said, but it hasn’t been good the junior miners, which represent the future of the mining industry.
“The downside bias has been created by a narrative that is pessimistic,’’ Kaiser said.
But Sprott said companies can help themselves by paying more of their cash to investors instead of putting it in the bank.
“In a zero interest rate environment, people who can convert cash flow to dividends will be able to change their market caps,’’ he said. “That is the solution to the problem.’’
Asked for his view, Goodman said small-cap investors should ignore “Mr. Market” and focus in on individual companies and their geological assets. “I am a long term investor and I don’t care what the individual traders are doing to themselves every day,’’ he said.
A California-based analyst and publisher of the Kaiser Bottom-Fishing Report, Kaiser said he is concerned that of the 1,800 mostly TSX Venture Exchange listed companies that he follows, roughly 670 have less than $200,000 in the bank.
“That’s enough to survive for about one year if the company sits around and does nothing,’’ he said.
As the junior sector is heavily influenced the price of gold, the three panelists where asked to predict where the yellow metal prices are headed in the near future.
Kaiser said he remains optimistic, if only because the problems in the geopolitical system are not going to go away. “Gold is a store of wealth and a hedge against uncertainty,’’ he said.
Goodman agreed. “I look at gold as being real money. It’s been that way for thousands of years.’’
“I’m a gold bug and I buy gold stocks every day,’’ he said.