Good synopsis, and would add that one factor required to get more longer term institutional holdings is size (a threshold), and liquidity. Even the best advanced stage companies are just too small, and too far under the radar screen. That means buying interest will only come from the "gold bug community", as in the people on this board, and that can be very fickle.
If they aren't going to be munched by majors or mid tiers, then there may be something to be said for merging among juniors, except when you see it happening as in the ANO and GBN models, it doesn't seem to work either. In theory it makes the capital raising task a bit easier, and starts to hit the size and liquidity requirements to attract institutions. The success of AGI came because they were able to get NGT-AGI merged before NGT could overly dilute the situation. Then McCluskey did a superb job of financing at good levels and placing with institutions, so an excellent model of how to do it. When you look at the real companies in the sector that are attempting to get into production and become mid tiers, you see them distracted and often overwhelmed by development issues. Witness how slowly the MFN, GBU, MRB, MNG, AGT stories are evolving, broken records, and like watching paint dry. I find juniors going it alone and developing mines to be a flawed approach. Maybe someone will prove me wrong, but I'm skeptical.
I've been going off on the liquidity threshold and munch issues for several years now, but nothing seems to happen. I generally consider management (including majors) throughout the whole mining sector to be rather poor. Therefore my attitude has really changed toward juniors, I'm no longer a permanent or long term holder. To me they are nothing more than trades, to be bought when the retail buyers get fickle. Then during the periods when I get more aggressive, I can hope that maybe something I own gets munched for a decent premium. Or maybe something I don't own gets munched and sets off a good sector rally. If not, as the retail crowd comes back in, I just distribute. Scaling in and out has been a pretty good approach since the fall 03 blowoff peak. |
