To OTC Dispatch Subscribers:
Micro-cap investors and speculators have some positive
statistics to look at. The OTC Dispatch Editorial Team noticed
that the OTCBB advances numbered over 700 for Friday's close,
with declines coming in around 620 (unchanged were 430). This
is somewhat gratifying given the NYSE, Nasdaq and Amex each
showed declines outpacing advances by a 10-30% margin.
And now on to the question we have been asked repeatedly as
of late - Are mining exploration stocks coming back?
Yes, gold spot has been strong(er). This immediately translates
into strength in precious metals stocks, especially the majors
who actually have gold assets. Juniors who possess mineral
exploration rights have had an upsurge to a degree, and the
world of penny mining stocks is scrambling to get ready for
what they hope will be the first bright spot in nearly 5
years!
We enjoy yet detest mining stocks. This is a dichotomy we
know, but stay with us for a minute.
We detest them because:
a) the sector is made up of some of the most incompetent
management teams we have ever seen (although there are
exceptions to this)
b) 99.9% of them (really!) burn through all their cash
and never create any value
c) more than 75% of them are pure promotions with no chance
of finding a deposit
d) most all of the stocks trade in Canada and are not subject
to SEC disclosure
We enjoy them because:
a) they are cyclical and therefore somewhat predictable
b) they are highly volatile
c) we understand them quite well
d) their tiny floats can result in rapid gains
We are agnostic on the subject of a possible near-term
emerging Micro-cap Sector Play in the penny mining stock
world. We do not know when it will happen. But if it does,
we will be there telling you about it.
For your benefit, we will share some thoughts with you to
keep you insulated from the inevitable mining-stock hype we
know you will be subjected to if the market does rally further.
1 - the real prices of virtually all commodities (including
gold) have been in decline for 200 years. This is largely the
result of technical advances which have lowered the cost of
extraction and processing. Backing out inflation, a lump of
gold today is worth only a tiny fraction of what it was 200
years ago. This trend will continue indefinitely.
2 - the world's central banks have enough gold stockpiled to
fill world gold demand for the next two decades. They are
sellers. Other than short-term upward price blips, rest
assured that the central banks will continue to whack the
gold-bid and keep the price in check as a result.
3 - mining exploration companies do not represent shareholder
value. They represent bits of paper called stock flying back
and forth between traders. Valuation methodologies are
virtually useless. Get in at or near the bottom or don't get
in at all.
4 - mining assets are ethereal and subject to interpretation.
Drill-cores get salted. Analysts get lazy and incompetent.
Commodity prices fall. Don't necessarily believe the numbers
you hear.
5 - there are entire armies of Canadian geologists, brokers,
analysts, and market professionals waiting to sell you a
mining stock scam. It is in their blood. If you buy a mining
stock, remember to sell before the music ends.
If the metals markets come back into vogue, then we are players.
Until next time, good speculating!
OTC Dispatch Editorial Team
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Disclaimer:
OTC Dispatch is published by OTC Dispatch Inc. OTC Dispatch
has not received any compensation for this report. A full
copy of the disclaimer can be viewed here:
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