Yes, the sure play and present value of money is why producers are valued so much higher than preproduction juniors with the same resources. I think those factors are already more than priced in to the stocks. The preproduction juniors have been hit much harder than the producers and many are still well under half their highs from earlier this year (e.g., MMGG, CZN, PAX) while most zinc producers are breaking out to new highs (EZM, TCK, HBM).
MMGG has far more proven zinc than BWR, and it's all in one world-class project rather than split across 4 smaller ones, but it trades at less than 1/7th the market cap. It has about twice the zinc of HBM, but trades at about 1/28th the market cap.
This huge discount of MMGG and some preproduction juniors is why I prefer them over the producers, as they are much cheaper per pound of zinc in the ground than the producers. They have much more leverage to the price of zinc. They also will have a much easier time to prove feasibility at higher zinc prices. I think if we get a big move in zinc (and if we don't), juniors will move faster and higher %wise than producers. Many preproduction juniors would need to more than double just to get back to their highs. I don't think the producers will double as easily from here. The valuation discrepancy for the same metal in the ground is just too wide. A catalyst that will help decrease this discrepancy is bigger companies will have more cash than ever, and will be searching for zinc deposits more than ever to replace dwindling reserves in a takeover frenzy as zinc prices go up.
With Amex listing, ongoing exploration drilling for silver and more zinc, the mine plan, and the feasibility study all coming up, my money's on MMGG outperforming the producers both short term and long term. Companies with large, economically viable zinc deposits in politically secure areas of the world will be in high demand in the coming zinc crisis, and I think MMGG will be the crown jewel in that department. |
