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Experts Agree that Now Is The Time to Buy Juniors
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A couple of weeks ago I was taking part in Rich Radez’s investment conference in Chicago where I had the opportunity to visit and interview not only Rich but also the other speakers.
I had a particularly interesting conversation with Clyde Harrison, who was the keynote speaker at the conference. I had visited with Clyde about a year earlier at the Las Vegas Gold Show and found him to be quite astute when it came to financial issues. Clyde has enjoyed a very successful career in the investment community over the past forty years and along the way has made his clients and himself a lot of money.
I believe that his success is the result of two things: a solid education and a positive attitude. Of the two, I put much more value on his positive attitude.
What does this have to do with investing in junior mining stocks today?
Simple, I believe that the prevalent attitude out there among investors right now is one that considers the “glass to be half empty” instead of “half full”.
John Embry, of Sprott Asset Management, told listeners of The Korelin Economics Report, during a show which we originated in Washington D.C., that he believes that people are not in the junior resource stock market today because they are afraid. Their fear is resulting from looking at all of the negative aspects of the financial world. They are focusing on the housing crises, the credit crises, the falling U.S. dollar, declining consumer sentiment, and all of the other “half full” considerations.
In the luncheon presentation at the Chicago conference, Harrison was asked to what he attributed his success. His answer was simple, “I have always considered the glass to be half full and I have always looked for opportunities with that philosophy in mind.”
After almost forty years in this business, I have become acutely aware that he is right because in all markets there is always an investment or investments that will make money. When the NASDAQ market was crashing in the U.S. and my friends were loosing half of the value of their retirement funds I found opportunities that were hugely profitable for my wife and I in the water industry. Shortly after that when gold was valued at $250 an ounce, I felt that the fundamentals were in line for significant appreciation in gold and I went in that direction while many of my friends sat and waited for their ridiculous high tech stocks to come back.
By considering the glass to be half full right now, I am convinced that the best investment opportunities are currently in the junior mining sector.
There are many companies out there that have absolutely fantastic balance sheets. They have plenty of cash and if you examine their property interests, you will often find that they have significant reserves as defined by Canadian 43-101 standards. Their reserves are also, often times, easily mineable. Truly capable and seasoned executives manage many of these companies. To me it is as obvious as the nose on my face that the share prices of companies, which have these attributes, will rebound from the lows where they are trading today. Why wouldn’t they?
A second tier of companies to consider are those that have two of the three characteristics – meaningful defined reserves and strong management. For whatever reason they are short on cash today and they have had to put much of their work on hold. Investment bankers are slow to finance companies in this environment, but when conditions change they too have to make a living and they do it by financing companies. This category of companies is at the bottom of the ladder today and their share prices are significantly lower than those that have all three attributes. Not a bad place for Al Korelin to also consider speculating!
Virtually all of the guests on my radio program, The Korelin Economics Report, agree.
David Morgan and I discussed the subject just last week on the show and he emphatically stated that he was convinced that the fundamentals in the precious metals sector were simply too strong for these stocks to continue to remain undervalued.
My colleague and good friend Jay Taylor is also in this camp. Jay stresses the value associated with the companies, which he covers above all else and he points out to our listeners and to his readers that today’s values in relationship to the respective share prices of most junior mining companies which he covers are increasing to almost unimaginable highs. (As an example, I can think of companies today that are selling for no more than the cash they have in the bank.)
Eric Hommelberg wrote an excellent article entitled The Investment Case for Junior Mining Companies, in which he outlined technical reasons for a turn-a-round in this sector. Hommelberg correlates the CDNX Index to the price of gold and when the resultant levels are low, as they are today, he points out that an upturn is inevitable.
We have an opportunity today that I believe could not be greater. Unless you are convinced that the junior gold stock market will never return, you must also agree.
Take a listen to our radio program and listen to what our group of experts has to say on this subject every week. If you don’t live in one of the hundred or so markets in which the show airs, listen on the Internet at www.kereport.com.
A.B. Korelin
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Al Korelin is the host of the internationally syndicated Korelin Economics Report radio program and the President of A.B. Korelin and Associates, Inc. – a regulatory consulting firm that has been providing services to mining companies for the past 27 years.
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