Junior Golds Rebounding Strongly Towards Historic Valuations - RBC

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 |  Includes: ALIAF, ANV, DRGDF, EGFDF, GBG, GDX, GLD, OSKFF
by: FP Trading Desk

It is hard to believe that just seven months ago, the junior gold sector appeared to be completely dead. But times have thankfully changed. Analyst Michael Curran of RBC Capital Markets demonstrated that the sector is rebounding strongly towards its historic valuations.

Mr. Curran tracks non-producing golds through a unique measure called "adjusted market capitalization per total resource ounce" (AMC/oz). Historically, he wrote that the group average has been in a range of $50 to $75 an ounce. But when the market bottomed out last November, it fell to a woeful low of just $12 an ounce.

The recent numbers are much more encouraging. In March, the average moved up to $23 an ounce. And in his update Thursday, he wrote that it has increased again to $33 an ounce.

To find the best junior gold investment opportunities, Mr. Curran seeks out companies that have strong takeover potential, and/or could be re-rated by the market. To help identify the best plays, he ranked them using a "3-Factor Model" that includes grade, size of deposit, and geopolitical risk.

Great Basin Gold Ltd. (NYSEMKT:GBG) had the best score using that model. His top picks in the sector also generally scored well. They include Anatolia Minerals Development Ltd. (OTCPK:ALIAF), Detour Gold Corp. (OTCPK:DRGDF), Osisko Mining Corp. (OTCPK:OSKFF), Allied Nevada Gold Corp. (NYSEMKT:ANV), European Goldfields Ltd. (OTC:EGFDF), and Central Rand Gold Ltd.