John Kaiser predicts that investing in juniors will become 'fun' again
Sept 28, 2012
John Kaiser believes it's time for a return to the junior mining sector's good old days, when investing was "fun" – think the Northwest Territories' diamond rush and the Voisey's Bay discovery in the early 1990s.
In a presentation at the Toronto Resource Investment conference on Friday, the editor of Kaiser Research Online said he believes a shift away from the number-crunching, feasibility level projects that have dominated the market for the past decade is imminent, with a revival of speculative, discovery-stage exploration to follow.
“I think that we're heading back into a space where we are going to see the public come back and want to place bets on exploration plays,” he said. “Right now, we don't have enough that are knock-you-over total wins – the glass is still half empty. But my pitch to you today is we are entering a window where this becomes very possible; the market is ripe for this.”
Kaiser said retail investors largely abandoned the junior mining sector after the Bre-X Minerals fraud came to light in 1997, wiping out many investors.
The current focus on advanced projects is a result of the ramp up of metals prices that fuelled companies to take another look at old discoveries that didn't make the grade at lower prices, but could be economic now courtesy of high demand from Asia. It's also a function of the largely institutional investors that have been funding the industry, which are more interested in metals prices and hard numbers.
Kaiser said if metal prices, which are no longer expected to continue to rise because of the slowdown in Asia, stay at current prices, then the remaining advanced projects that work at these elevated prices will be taken over.
“Then there will be no other failures from past exploration cycles to drag out of the woodwork and do feasibility work on,” he continued. “We will have to go and look for new deposits and they're going to be for ones with high grade, big size – the kind that work even if we do go into a downturn.”
Kaiser also predicted there will be a resurgence of exploration in the United States, which for the past decade, has been “one of the worst places to explore. In particular, Kaiser likes the Basin and Range area that includes Nevada and parts of California, Oregon, Idaho and Utah, as well as the Upper Peninsula in Michigan.
“Nevada, I think, is going to explode,” he said.
With its Red Hill and Goldrush discoveries in the state, Barrick Gold (ABX-T) demonstrated that there is more gold to be found in Nevada. The discoveries, which together host 7 million oz. of gold (inferred and indicated) in the state on Barrick's Cortez Hills property, 6 km southwest of the Cortez Hills mine, were announced in late 2011.
Kaiser also has an eye on Nevada Exploration (NGE-V), a penny stock that is using an innovative method of finding new Carlin-type targets in Nevada by searching for gold in groundwater samples that could give away hidden deposits. McEwen Mining (MUX-T) recently announced that it's funding the junior's Grass Valley project to a production decision for a 70% interest. Nevada Exploration has been one of Kaiser's recommendations since late 2008.
The analyst and newsletter writer said that discovery investing is not only a way to hedge against the possibility that the economy will remain poor for a few years, but he thinks the sector will prove tempting for Americans who have trillions of dollars in savings sitting on the sidelines.
“I would say focus on the United States because the American retail investor, with $8.7 trillion parked in savings deposits earning nothing, when they start to get wind of Nevada and the possibility that there's more gold to be found and (that) it's also a good thing for America to have more gold because the status of the U.S. dollar as the reserve currency in the long run is in danger. . . it becomes also a patriotic thing, it becomes a self-sufficiency type thing.” |
