This One Mining Sector Now Has The Most Potential – GeologistBy Neils Christensen of Kitco News
Tuesday September 27, 2016 08:22
(Kitco News) - While it might seem like the gold market is losing momentum and prices have been stuck in a range since July, one geologist and mining analyst said that there are still plenty of opportunities for investors.
Micky Fulp, founder of the Mercenary Geologist mining newsletter, said that he sees strong potential for exploration and early-stage development companies in the mining sector. He added that optimism, which he described as “buoyant,” was strongly felt at the 2016 Precious Metals Summit at Beaver Creek, Colorado, which he recently attended.
“I’m not buying major miners or mid-tier producers. I’m buying companies in the five- to 25-cent range. That is where the value is right now,” he said. “There is a lot of money out there right now being thrown into the resource sector and we saw that at Beaver Creek.”
When looking for opportunities in the mining sector, Fulp said that he prefers the exploration and emerging producers, as they currently have seen the same gains as compared to other sectors in the mining space.
Fulp said that the mining index he is currently watching right now is TSX Venture Index in Toronto, a good representation of explorers and early-stage companies. Currently, the index is trading around 800. While up since the start of the year and off its multi-year lows, the index is down from the 2,000 level seen in 2011 and down from its all-time highs seen nearly a decade ago above 3,300.
The TSX Venture Index is up about 55% since January, beating gold’s gains, which is up more than 26%. However the index has lagged other mining sectors by comparison. Market Vectors Junior Gold Miners ETF (NYSEARC: GDXJ), a representation of mid-tier junior gold producers, is up almost 130% for the year. At the same time, major gold producers in the Market Vectors Gold Miners ETF (NYSEARC: GDX) are up almost 82%.
“What I’m looking at right now, I think the TSX Venture has room to move and my sweet spot right now is startup companies,” he said. “Where I’m finding the great deals are the startups with the right people. My money is going into projects that have the people who have had seen success before.”
Fulp said that the nano-cap gold companies with early-stage projects offer the best value for investors.
Along with the right people, Fulp said that companies’ equity structure and projects’ jurisdiction are other important factors investors need to look at. And when all of these elements fall into place investment becomes “a no brainer.”