Junior Gold Miners Stock Selection & Trading . . . . . . .

Some good advice from those who know

FUNDAMENTALS
  • Jim Slater - of Zulu Principle fame - A keen Gold Mining Investor - Read his general principles and gold mining specific advice. Sold up last cycle. Currently invested in Spanish Mountain and others. See also Junior Gold mining fund - weak performance recently.
  • Rick Rule - Good discussion of what to look for in Junior Gold Exploration stocks
  • Troy Schwenson is Australia based and runs "Goldnerds" a very analytical service, an old discussion of junior investment here at Herencia Research
  • Doug Casey - 8Ps of Resource Stock Evaluation
    • People - GOOD PEOPLE IN GOOD PROJECTS. Casey's  Nexten and other names
    • Property - district scale, large buyout targets most attractive.
    • Phinancing - Cash held to prevent desperate stock issues and dilution
    • Paper - Options / warrants / dilution risks which will 
    • Promotion - good but beware how long it can last, buy in tranches / wait for pullbacks if compelling
    • Politics - Fraser Institute Survey 2010/11 - Safe Jurisdictions / Countries
    • Push - catalysts - see goldstockinvesting news
    • Price - Market Cap. Easier to move $10m cap > $100m than $100m > $1bn. Technicals breaking resistance etc.
  • A Similar good list of focus areas on"How To Pick and Evaluate Junior Mining Stocks" at "theinvestmentblog"
  • Pinnacle Digest - Focus on capitalisation and management
  • Recent 2012 Pinnacle Digest Junior Miner Briefing 
  • An excellent overview from Don Durrett of GoldSilverData , likes those taking projects through to production. And more on his "Mining 101"
  • A review by Michael Kosowan of Sprott - focus on high grade deposits
  • Midas Letter -with Ian Gordon - Finding Stocks that Double - Identify Juniors with Majors holding a stake.  
  • Ian Gordon here at the Globe and Mail, same focus on proximity to historic and existing production, involvement of majors - some of the key themes explored on this blog. Quoted by a company he picks as fulfilling the criteria.
  • Jordan Roy Byrne - How to Find the Best Junior Gold Stocks - Good article though promotional. Focus on:
    • Capital Structure - Paper
    • Projects - good grades, good lengths, district scale.
    • Buy Takeover candidates on the cheap - Price - having confidence in your analysis allows you to trade the inevitable cycles. - Gold Merger & Acquisition Targets on this blog.
    • Favour Junior Producers with Development Projects. Bob Moriarty at 321 Gold often emphasises production potential as a way to minimise the explorers' dilution risk. Multiple mines de-risk the juniors to some degree, the Emerging Multi-Project Consolidators page here explores this theme.
    • Find Management Teams with a track record - People - Good People - Good Projects. Especially to build mines, but big names come with a price premium - except in bad markets where real bargains can abound as institutions facing redemptions dump the good and bad to bids they can find.
    • Technical Catalyst - Buy cheap at strong support - see Technicals below.
  • Sprott's Eric Angeli gives advice here on investing in miners where fundamentals can improve even without the price of gold increasing. The a top 7 things to look for
    • Look for companies where management owns a large percentage of the stock. A vested interest at a higher share price is even better.
    • Look for a tight capital structure. A bloated outstanding share count is a red flag. As is a history of management carelessly diluting away shareholder interest by issuing new stock.
    • Look for a thrifty management team. A good company should spend their capital on projects, not swanky new offices.
    • The company's mine should remain profitable even if gold drops to $1,000 per ounce. It could happen.
    • Look for companies with enough cash to finance their current drill program, expansion plans, feasibility study, or construction phase. This year in particular, companies are having a very difficult time finding financing. Those who have adequate cash are diamonds in the rough.
    • Know which countries support mining. A tier-one asset under the control of a wildly corrupt government isn't really a tier-one asset. You don't want to get caught in the middle of a government dangling final permits above managements’ heads.
    • Know the geological potential of the exploration area. A four-million-ounce gold deposit is swell, but what if your company discovers not just one gold mine, but an entire new gold district? How will you factor in that upside?
In summary I take the best advice from Bill Cara and, strangely, Casey's explorers league, that picking the good jockeys is critical in the junior mining "game".
Even when you pick a good jockey be very wary of buying momentum of near IPOs. The IPO placements and fund raisings go to large investors and merchant banks. It has become a familiar game for them to keep "warrants" as a stake in the junior's success while selling the stock holdings. It is well to be aware of "tie-up" periods where they can't sell and when this comes to an end because a wall of selling can hit the stocks. Ultimately this has the potential to offer genuine rewards to new buyers on the open market but can be very unsettling.
A recent example might be Asante Gold (ASE.v) run by very successful management from PMI Ventures, Doug McQuarrie. This stock has traded down 20% after initial IPO.

TECHNICALS
  • Bargain hunting and bottom fishing, buying weakness - in the sector / in specific stocks. In particular near strong technical support.
  • Buying breakouts - risky but the biggest stories will build, unfortunately so many don't.
  • Buying strong stocks behaving well - buying momentum while it lasts. Some great stocks from the 2008 bottom steadily climbed until 2011, for example Allied Nevada, Semafo. These were big emerging producers and developers. Many other steady climbers. Premier Gold, as a developer. The micro-caps rarely move steadily. 

Discussion 
Reasons for Junior Investment and timing in the business cycle - Bob Hoye interview with Dominic Frisby on Stockopedia - Hoye - Gold stocks will be up and down with NYSE - over the years gold outperform upside. Juniors eventually a big party. Individual companies can have their own timing.
Hoye regular interviews on Howestreet.com, "Bob & Phil show"


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