Lower gold prices have hit mining shares very hard. The feasibility of many development and exploration projects is uncertain given a gold price of just $1,275/ounce. As a result, funding has all but dried up for companies -- particularly smaller ones without current cash flow -- because banks are unwilling to lend to companies that may not be able to generate cash-flow at the current gold price.
For those who are bullish on the price of gold, this may be presenting an excellent opportunity to purchase shares in small mining companies at a huge discount to their 2010-2011 highs. But there are still significant risks in owning these companies even if you believe that $2,000/ounce gold is a foregone conclusion....
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