lance sjogren

Finding the Right Junior Miners for Maximum Upside Potential

Another thing to think about right now is Uranium.

Uranium miners have been in a big slump.

Consequently, Uranium is one of the few super bargains out there right now in the commodity space.

I have been stocking up on Hathor, a little bit of Terra, and a little Denison.

Hathor has the biggest recent discovery by a junior of high grade U in the Athabasca region. Terra has a 10% carried interest in that deposit so it is another way to play that resource, although with Terra you don't get a stake in Hathor's other promising properties.

Finding the Right Junior Miners for Maximum Upside Potential

Hey, thanks for this forum.

I am constantly questioning my own investment decisions.

By motivating me to come up with a pitch for my top two holdings, I found that I was able to make what appears to me a pretty compelling case.

So, I am happy with my two main holdings.

I know there are a lot of opportunities out there that I will probably regret not having, but that is life. I like Silvercorp and have had it off and on, but since it's more liquid than my larger holdings it is a tempting one to trade in and out of to try to take advantage of the volatility in silver prices.

I also like First Majestic and Endeavor, and I recently noticed another one that looked interesting, Alexco I believe it is called (I really should remember the name since I bought a few shares)

But, what I like best is exploration-only plays (nothing can go wrong with your gold and silver when it is just sitting in the ground, except for things like being confiscated by Kleptocrats like Hugo Chavez or killed by enviro obstacles.

(Environmental obstacles are one reason I think the big blockbuster deposits of low grade such as those of Novagold, Seabridge, etc., are pretty risky. First of all if the price of oil goes sky high then they are liable to not be economic even if PM prices are strong. Secondly, mining hundreds of millions of tons of ore in pristine areas like the mountains of BC seems like something highly vulnerable to being killed by regulatory obstacles. Case in point, Northgate Minerals' Kemess North deposit.

Finding the Right Junior Miners for Maximum Upside Potential

By the way:

Anyone in the US who wants to invest in junior mineral companies should get used to buying pink sheet.

The vast majority of juniors listed on the Canadian exchanges have a US version but only in pink sheet form.

I have traded these for a number of years and by trial and error I found how to trade them with very little penalty for the fact that I am not trading the native Canadian version of the stock.

First of all, I found the best vehicle for trading them to be TD Ameritrade. I have long had a hunch that because of TD being Canadian, when I buy pink sheet I suspect that it is actually the Canadian stock they are trading and that somehow in their administrative system they are able to convert it into pink sheet.

However that works, it seems to work fairly well. I used to have an international account with another broker to check the real time price of the Canadian stock, but nowadays I just check the time delayed price on Yahoo, then I translate to USD, then put in a limit order on TD Ameritrade. Sometimes I'll just order a fraction of what I want to buy and if it doesn't trade I will jack up the price a half cent at a time until I get an execute, that way I get "price discovery" and then decide whether I want to buy more.

Most of the time I seem to be able to buy at the ask price or sell at the bid price or very close to it.

Some investing guides I read a couple years ago advised against these because of the propensity to wind up having to pay large penalties due to the illiquidity. I found this is not the case, with one caveat.

The one caveat being that the bid-ask spreads are often substantial. That is not a symptom of buying pink sheet but simply an inherent characteristic of many small companies that trade on the Canadian exchanges. So I often find I have to wait to trade a particular stock until it happens to be trading a little more than usual and its bid ask spread shrinks to a reasonable level.

Finding the Right Junior Miners for Maximum Upside Potential

My favorite is Sabina Silver. Market cap about $100 million US, they have something like $30 million in cash for exploration, and their resources are:

Back River: 2.3 million ounces gold at 10 gpt

Hackett River: 230 million ounces silver at 4 opt + base metals with in-situ value about equal to the silver. Most of the deposit is open-pittable.

Aggressive drilling programs are in the works.

If you convert everything into gold equivalent (assume a 60:1 gold to silver ratio) these guys have about 10 million ounces of good grade gold equivalent, and you are getting it for about $10 per ounce. In terms of silver equivalent it is about 600 million ounces or $0.16 per ounce of silver. And these are GOOD deposits too.

Main drawback is that their deposits are in a remote area in Nunavut, to develop a port needs to be built at Bathurst Inlet, estimated cost $100 million, plus a road to the deposits. Since they recently acquired the Back River deposit they have a bigger resource base to spread the capital costs over. Other players in the area may help spread the costs as well- e.g. the Chinese recentlly acquired the Izok Lake and High Lake base metals deposits from Oz Minerals. I would think there is also a possibility that Canada govt might chip in some for a port as part of their goal of solidifying their claims to the far north in competition with Russia, but that is pure speculation on my part.

2). Eastmain Resources. 1.2 million ounces high grade gold in northern Quebec. The primary deposit, Clearwater, is close to Goldcorp's Eleonore deposit. Goldcorp owns about 10% of Eastmain. If you just count their main deposit, Clearwater, they have 1 million ounces. At a fully diluted market cap of about $100 million US, you are paying about $100 per ounce of gold, which is not cheap, however, this deposit should be able to leverage Goldcorp's infrastructure at Eleonore, so it is almost equivalent to gold at at an active mine where all infrastructure is already in place. Furthermore, there is a widespread view that drill results in the last couple years could well lead to a substantial expansion of the resource when the new 43-101 comes out.

Those are my primary 2 holdings in the PMs. A couple of others I have a much lesser amount of are Golden Goose Resources (Quebec gold deposit) and Terra (10% carried interest in Hathor's high grade Uranium deposit in Athabaska)


Note: Note that I count all resource ounces whether they are measured, indicated, or inferred.

Invest in Gold to Hedge Against Hyperinflation

Inflation:


The thing about inflation, you have to figure that in many key sectors of the economy, price inflation is going to take quite a while to kick in.

The government will be printing money like crazy, but it is hard to see wages go up for at least 2-3 years. People are losing their jobs, and those who are working are getting pay cuts.

So if you look at price inflation from a supply and demand perspective, it is hard for example to see how there is going to be price inflation in housing anytime soon. Who is going to be able to afford higher prices on homes? People will be LESS able to afford homes.

Now, sooner or later I do believe monetary inflation will start affecting the labor market and we will start seeing wage increases to help mitigate the devaluation of the dollar caused by our deficit spending binge. But I think that will occur over time.


The toughest question in my mind is: If we are going to be printing trillions of dollars of new currency, where is it going to go?

Well, the deflationists say, it will simply start filling up the black hole of debt that is dematerializing.

And I think it is true that is the first effect. But in my mind it is clear that the government/Fed will not be inclined to slam on the brakes once the black hole is filled back up, because the real economy is still going to be in a shambles.

So at some point the black hole gets filled up with US dollars and they start spilling out.

What will they spill into? My hunch is the first thing will be commodities, especially precious metals. To some degree maybe also stocks, but I can't see stocks going up much any time soon because they are pretty high priced compared to anticipated earnings.

Eventually, I would think stocks will go up, then wages, and then real estate.

Sooner or later all prices are going to go up, but I believe different sectors of the economy will see price inflation at different points in the new inflationary bubble period we are entering.

Invest in Gold to Hedge Against Hyperinflation

"Better two years too early than 20 minutes too late. "


I like that.

Why I'm Buying Queenston Mining

I got into Queenston in 2006 and have been in and out. Lots of gold, first rate management, solid cash position so long as they remain an explorer (going into production would require raising a substantial amount of cash, I think).

Their gold is in an established mining camp, a big plus. Electric power, roads, workforce, etc.

Their one weak point in my view is that some of their gold is pretty darn deep in the ground. Not sure how economic pulling out 5-6 gpt stuff is from a deep underground mine. I think the economics of their deposits is the main issue that has caused QMI stock not to be higher.

However, as the good gold deposits around the world get mined out, the next best deposits wind up being the prime candidates for production. I think QMI's are reasonably close to the top of the list as far as that goes.

Being in probably the most politically stable mining country is also a plus, although Canada no doubt has considerably higher labor costs than a place like Mexico.

Mining Indaba Conference - Even the Bears Are Bullish on Gold

Rolexdaytona:

If gold is dead, what is paper money?

Five New Forces to Drive Gold Higher

The one argument I don't buy is #5. "Past performance is no indicator of future results".

As a contrarian, I would be more attracted to gold if its price performance during the 2000s was ROTTEN.

Nevertheless, I think it is still WAY undervalued.

Gold: The Next Reserve Currency Player

Eloquent portrayal of the pessimistic scenario, MexicoMike.

I am not convinced how bad a future we are headed for. But I must say that a doomsday economic future appears to be a strong likelihood.

One thing I have long believed- Americans have become complacent from having had a society of material abundance and lack of war (on our own territory) for many decades.

This has lead to a widespread view of "it can't happen here".

Another way to put it is that in the United States, the concept of "American exceptionalism" prevails. I guess the concept is based on some feeling that we have a special blessing from God, or that somehow our constitutional system of government (which has deteriorated greatly in recent years, but is still far better than that of virtually any other country) somehow makes us immune from the laws of nature to which all other human beings are subject.

Unfortunately, I see no reason why "it can't happen here".


Actually, even before the current financial crisis, you could see some of the initial signs of such a breakdown in dysfunctional places like California. The quasi-Marxist regime in Sacramento has for many years had the state's economy on the early stages of a death spiral- by jacking up taxes and spending at every opportunity, and welcoming the world's poor to flood into the state and be supported by the taxpayers. Utterly insane public policy, but bought into not only by the sheeple but by the dimwitted "journalists" who run a news media based on the grand concept of "don't worry be happy".

As the national economic downturn gets worse, one small positive side effect may be that the leftist buffoons who run places like the state of California may be thrown out of office by the populace. All that will do, however, is perhaps allow California to not deteriorate much faster than the rest of the nation.

We face a likely economic death spiral in the United States, and much of the rest of the world. Misgovernment in places like California have created parallel terminal economic illnesses. In other words, California would have destroyed itself even if the rest of the country were economically healthy. However, all evidence seems to indicate that all of us, at least in the United States, Britain, and a number of other countries, are headed for economic oblivion.

Expecting Epic Gains in Gold Miners

Weston:

Without outside intervention, I would say we indeed are headed for a deflationary depression.

Central bankers, however, based on their own philosophy as well as that of the politicians who pressure them, are committed to printing as much money as necessary to fill the sinkhole.

The scenario of continued deflation does not factor in the massive ongoing monetary intervention.

Silver and Gold: Buy, Hold or Run?

Let's think about this observation:

"Difficult to evaluate your objectivity without your disclosing long/short position in gold/silver stocks."


What could we possibly learn about his objectivity from that? If he believes the fundamentals of gold are good, then I would assume he owns gold stocks.

If he thinks gold is a bad investment, would he buy gold and then tout it as a great investment?


I have never been able to understand this nonsense about how commentators must have an ulterior motive in the opinions they express, due to having a personal stake in that particular investment.

You can buy and sell frigging stocks these days with the click of a mouse. Why in the hell would someone invest in something they don't believe in?

Your comment makes absolutely zero sense.