Despite the junior resource sector being near a major bottom and going through a bear market of epic proportions, I still believe that this may be one of the best times to add to quality positions. Nothing perfects one’s craft in the financial markets like a bear market. In a bear market one has to refine their skills in stock picking. The emergence of a new bull market is usually the most propitious time for outsized gains.
I was blessed in selecting two of the best performers in 2014 which was an extremely volatile and treacherous market for junior miners. In a bull cycle it is easy to pick winners as all stocks rise even the subpar ones. In a bear market it is extremely challenging as 90% of the stocks fail even the good ones who pass all stock selection rules. Nevertheless, I continue my mandate from my premium subscribers to scour the resource market for the most exciting opportunities that could be a winner in any market.
Investing in stocks is easy if you follow the rules that have proven to be successful over time. The number one rule is buying low and selling high. Many investors are chasing the US dollar and Large Cap Equities to record heights liquidating all their junior miners. Be careful of selling low and buying assets at record high valuations.
Similarly in 2011, the herd mentality pushed silver and gold to record values selling all their stocks before a multi-year correction ensued. See my article back in 2011 which was published on Seeking Alpha which warned about the precious metals market overheating and my video analysis from August 2011 forecasting a bottom in the S&P 500.
The opposite tactic should now be considered of liquidating large cap equities, real estate and the US dollar and build positions in junior resource stocks that are extremely high quality and compelling takeout targets. Gold and silver could gap higher by the end of 2014 and the top notch juniors could skyrocket.
Its not just me that sees the value in gold, but entire nations. The Swiss voters on November 30th will decide to back the Franc with a 20% gold reserve with a pledge never to sell its gold again. If the Swiss approve this they would have to purchase 1,500 tons of the yellow metal. This is a significant amount considering the Russians bought close to 19 tons in October. Demand in China and India is still strong as evidenced by record coin sales and numismatic premiums rising.
If the Swiss decide to back their currency it could be a shot heard around the world and could spark a global rush to buy physical gold and silver by other nations. Eventually, that change in psychology could affect our junior mining positions trading at pennies on the dollar to see explosive gains.
Many Central Banks around the world have a zero or negative interest policy. This expansion of fiat currency on the market has never occurred before yet investors are flocking to the US dollar in record proportions. However, smart investors are already positioning ahead of the masses. When the US dollar bubble pops and follows other currencies lower, then gold and silver may appear as the new safe haven. It is at this time where our junior miners which are trading at pennies could be trading for dollars.
When this financial event occurs it will be too late to buy. One has to prepare ahead of the storm. What makes one wise in the market? Being able to see the developing storms ahead and acting upon it before it hits. The rebound in precious metals could be one of a series of gaps higher. Right now look for a rally to begin when the recent downtrend in gold since July is broken to the upside at $1205.
Look at a few of these junior miners which could be on the verge of a major move higher.
1)Take a look at this junior PGM Developer. This past week Antofagasta offered $.45 per share for junior miner Duluth Metals Twin Metals Ni-PGM deposit in Minnesota. The Twin Metals Deposit is similar to this junior as they are large PGM deposits in North America. Dundee put out a research note after the transaction which showed if the company was bought out at the same valuation as Duluth it would be more than double its current price.
2)This junior near Las Vegas, Nevada has recently hit some great high grade gold results which were the best holes drilled so far on the property and possibly the best hole I have heard from Nevada in a long time. Some of the smartest gold funds such as Tocqueville and Van Eck recently participated in a Private Placement at $1.20 Canadian. Despite the best results to date on the property, one can buy the stock at a cheaper price then the smart boys. The junior has a great exploration team and I am excited to hear of further results.
3)For more speculative investors looking for the potential of outsized gains I found a junior that is trading at a $4 million market cap but is sitting on possibly one of the best gold-copper porphyry discoveries in the entire world. More than half of the shares are in strong hands with the largest holder of 22% being CEF Capital. CEF Capital is owned 50% by Mr. Li Ka-shing (Asia’s richest man) and 50% by Canadian Imperial Bank. The company is currently trading at a huge discount to the last financing which was done at $.55. Remember there are many risks with a micro cap and an early stage exploration company. However, the quality of share structure with only 45 million shares outstanding and having one of the best gold copper porphyry discoveries I have ever seen has gotten me excited as well as a few others such as Eric Coffin and Bob Moriarity. I believe the majors such as Newmont or Freeport should look to invest in this discovery as it has hit multiple intercepts of more than 200 meters at greater than 1% copper equivalent. Eric Coffin, a respected writer from Hard Rock Analyst wrote a report on this company that was posted here and should be read.
Disclosure: I own all three companies and they are all website sponsors. Be aware of conflicts of interest and please always do your own due diligence.