Even more interesting stuff!!!
January 25, 2001
StockHouse News Desk
By Craig Stanley (cstanley@stockhouse.com)
StockHouse Columnist
Junior Mining: Getting in on the Platinum Group Boom
Toronto, ONT, January 25 /SHfn/ -- Over the past year, stock markets in North America have witnessed the collapse of Internet stocks and a general decline in the technology sector. As these markets continue to trade without direction, investors are left wondering which sector will be the next "hot thing."
Well, behind the scenes, a bull market has been raging, one that has received little coverage in the mainstream financial press: the skyrocketing prices of platinum group elements (PGEs).
The above chart sums up what has been happening in the shadows of the tech decline. Palladium prices rose 29% in 1999, soared 120% in 2000 and are up almost 10% this year alone. Though not as drastic, the rise in platinum is no less significant: up 18% in 1999, followed by a 42% jump in 2000 and a 2% gain already in January.
Compare these results to the two precious metals that garner the most news attention: gold and silver. Gold prices dropped 2% in 1999, followed by a further 5% decline in 2000. Silver was up 8% in 1999 before falling 15% in 2000.
PGEs consist of platinum (Pt), palladium (Pd), rhodium (Rh), osmium (Os), iridium (Ir) and ruthenium (Ru). The most common of these are palladium and platinum, with futures contracts trading in New York on the Commodities Exchange (COMEX).
Palladium prices rose 29% in 1999, soared 120% in 2000 and are up almost 10% this year alone.
The phenomenal rise in prices for these metals basically boils down to two factors: diminishing supply from Russia and strong growth in industrial uses, particularly in automotive catalytic converters that reduce hydrocarbon emissions.
Yet despite the rise, investors holding shares of junior mining companies exploring for these metals have not benefited from sustained appreciation, or increased liquidity in, their stocks.
Four things appear to be behind this lackluster performance:
The downturn in gold and silver prices: The general decline in these metals has unfairly cast a gloom over the entire mining industry. Investors only looking at the mainstream financial press are not being informed of the bull market in PGEs.
A lack of major players: In North America, there are only two companies that solely mine PGEs: North American Palladium [T.PDL], with a market cap of just over $750 million, and Stillwater Mining [SWC], with a market cap of US$1.5 billion. Contrast this situation with the energy sector, where the sheer number of companies with significantly larger market caps drives investors to more speculative stocks as they look for the next big discovery.
Fallout from Bre-X: The Canadian junior mining sector has languished under a suspicious cloud since the collapse of Bre-X in the mid 1990s.
The Internet bubble: Speculative money that might have been invested in the sector instead found its way into Internet stocks over the past couple of years.
But the word on PGEs might be finally getting out. After hitting a 52-week low of $5.50 on April 17, shares of North American Palladium have steadily moved higher, closing at $15 on Tuesday (a 172% increase). Shares of Stillwater have climbed 61% from their 52-week low of US$24.25 on June 23, closing on Tuesday at US$39.
The fundamentals that have helped bolster prices so far are not disappearing.
Money has also been moving back into the juniors, with the CDNX mining subindex climbing from below 4,000 in May to over 5,500 in January.
Is the rise in PGE prices solely a speculative bubble? Perhaps, but the fundamentals that have helped bolster prices so far are not disappearing, arguing against a drastic decline.
This article initiates StockHouse's coverage of Canadian-listed junior mining companies exploring for PGEs. In addition to explaining the reasons behind the rise in prices, this column will alert investors to stocks of junior miners that could appreciate significantly over the next year, based on a number of criteria including:
The geology of areas being prospected and proximity to known deposits.
Timetables for drill results and the interpretation of results.
Management's experience and track record in exploration and in protecting small investors' stakes.
The company's size of stake in a project and joint venture partners.
Analyst coverage from brokerage houses.
The promotion of the stock.
Readers should appreciate that junior mining stocks are extremely speculative, may experience long periods of low trading volumes, and are not appropriate for risk-averse investors.
The following tables list some of the players involved in the hunt for PGEs. The first two tables contain companies grouped according to the location of the prospects -- historically, if one junior discovers a deposit, then others in the same area get a boost (e.g., Voisey's Bay).
Sudbury Area
Aquiline Resources [V.AQI]
Aurora Platinum [V.ARP]
Canalaska Ventures Ltd. [V.CVV]
Champion Bear Resources Ltd. [V.CBA]
Consolidated Venturex Holdings Ltd. [V.CVA]
Crowflight Minerals [V.CML]
Freewest Resources [M.FWR]
International Freegold [T.ITF]
Mustang Minerals [V.YMU]
Pacific North West Capital [V.PFN]
Sparton Resources [V.YSP]
Wallbridge Mining [T.WM]
Northern Ontario
Avalon Resources [V.AVL]
Canadian Golden Dragon Resources [V.CGG]
Classic Gold Resources [V.CGU]
Denstone Ventures [V.DST]
East West Resource Corp. [V.EWR]
L.E.H. Ventures [V.LEH]
LMX Resources [V.LMX]
New Millenium Minerals [V.PGM]
Starcore Resources [V.SOE]
Other PGE Players
Anooraq Resources [V.ARQ]
Idaho Consolidated Metals [V.IDO]
Muskox Minerals Corp. [V.MSK]
Starfield Resources Inc. [V.SRU] |
