It has been an awful 12 months for the junior gold sector. Despite an 18% rise in the gold price, the equities are down 52%, according to Haywood Securities analysts Andrew Kaip and Kerry Smith. As investors worried about the health of financial markets, they moved their money out of the high-risk sector and the results were devastating.
The Haywood analysts note that there are now plenty of compelling valuations among the junior golds. In fact, the companies they cover are pricing in gold at just $480 an ounce, 47% lower than the current spot price.
They wrote in a note to clients:
The junior precious metals sector presents prime acquisition targets that we expect to materialize once a semblance of stability is restored within the broader markets.
However, they noted that investors should be focused only on the companies with good cash positions, good management teams and projects that are advanced enough to generate investor interest once the turmoil on the market subsides. They have realigned valuations of junior companies to focus on those names.
The best buying opportunities they pointed to in their coverage universe include: CGA Mining Ltd. [TSX:CGA], Lake Shore Gold Corp. [TSX:LSG], Linear Gold Corp. (OTC:LGCFF), Andina Minerals Inc. (OTC:ADMNF), and Anatolia Minerals Development Ltd. (OTCPK:ALIAF).