In a world of increasing monetary instability and uncertainty, more and more investors are taking larger positions in tangible assets and the resource sector in general. There is a great fortune to be made by picking the winners from a flood of junior resource companies vying for a slice of surety.
If there is one thing you can count on in an age of fiat currency manipulation by central banks (manipulation which is clearly not going to solve the underlying problems that generated the need for more and more debt tranches), it's commodities; especially relatively fixed value commodities like gold and silver. But the entire resource sector is fair game as well, with metals like copper being a natural choice due to massive consumption vectors, as well as resources like graphite (increasingly important as a high-tech alloy/material and the backbone of nanotech with China controlling 75% of supply), potash (essential for industrial farming with potassium fertilizers), and even uranium all being viable plays.
Uranium is an interesting choice due to the black swan event of Fukushima depressing prices, even as the Megatons to Megawatts program is set to expire in 2013, meaning that the 104 commercial reactors in the U.S. that provide nearly 20% of our power will no longer have access to cheap, down-blended inputs from former Russian HEU (high-enriched uranium) warhead material. You add a uranium hungry global market and it is not hard to see there are many under priced uranium developers out there.
The rush to get into physical resources can be seen in the swelling ranks of the Toronto Stock Exchange. While this environment is indeed quite speculative, there are huge moves to be caught by savvy investors who are able to identify the right combination of projects, share structure, and personnel. The precious metals are expected to dominate amid a slowdown in China (factoring in planned government curtailments and overheating) and a global race to debase currencies, led most prominently by Europe and the U.S.
One of the newer players in the junior resource sector, Trueclaim Exploration (OTCPK:TRMNF), which recently completed a preliminary review of the latest ground magnetometer survey data on their Richmond Basin Silver Claims in Arizona (Barr Vein and Black Copper Zone project areas, upwardly revised size of the massive copper-silver-gold anomaly is now some 1,950 feet, with 9.39% copper, 88.6 opt silver, and 0.084 opt gold grade returns), is a perfect example of the many mining companies ready to make big moves as people catch on to the value proposition inherent in minerals today. Trueclaim will be moving ahead with a drilling program pending return of the summary report by Zonge Engineering out of Tucson, anticipating solid future production out of this important piece of the company's acreage portfolio.
Of course the array of problems which generated the fiscal cliff is well beyond Bernanke or Draghi, a fact confirmed by the Third Basel Accord making a change unseen for over four decades, with the movement of gold from a tier 3 asset (not real money, allowed for loan reserves at only 50% of market value), to tier 1 capital, alongside cash and bonds. Take a look at the obvious race to stock up on gold tonnage at central banks in all major countries as well, with even Germany looking to put hands on its gold and the considerable flap about China holding onto all domestically produced tonnage, with a possible reserve target of 2k tons being set by the People's Bank of China (while discretely shedding their some $3.24T in foreign exchange reserves, $65B lower at June 30 than in Q1 2012). The influence/policy of the Basel Committee on Banking Supervision alone should be enough to tell you which way the wind is blowing and at some point in Q1 next year we will again hit the debt ceiling here in the U.S., as the very event which tipped off the 2011 summer turbulence stares us in the face again.
What do Basel and the entire planet's central banks know about gold (and also silver) that they aren't openly telegraphing to the average investor as we face a one-two punch of deflationary cascade failure and inflated fiat currency that never finds its way into broader liquidity? Will gold break $2,000 an ounce and will Europe implode in a ball of digital debt-based instruments? One thing is for certain, the junior resource companies digging hard assets out of the ground are looking good on the National Association of Manufacturers 2012 report, Fiscal Shock: America's Economic Crisis, which offers a clear portrait of sectors positioned to be the hardest hit by the impact of going over the fiscal cliff.
Corvus Gold (OTCQX:CORVF) is another solid example of an agile little company that has really put together a tidy carried interest/royalty exposure package of gold related sites in Alaska, Quebec, and Nevada, where the company's flagship, 100% controlled North Bullfrog Project's preliminary economic assessment on the 1.67M plus ounce resource shows tight production economics ($673 per ounce operating cost). Projecting some 57.7k ounces over 12.8 years of mine life for this one project, Corvus has a proven track record of performance and a growing portfolio to attract those investors who are keen enough to be seeking hard asset shelter from the fiat currency storm.
The recent downturn in gold stocks and subsequent price holding pattern can be chalked up largely to the persistently tough economic outlook fundamentals and lack of any clear resolution to the contributing factors. It is a solid time to get in on some undervalued juniors that have upside-positive fundamentals and there is a whole host of locations in emerging and domestic markets to look at, each possessing their own pros and cons in terms of potential and logistics. Markets are clearly not impressed by twisting or QE anymore, and the speculative money is leaving a lot of these gold and silver stocks in trepidation over the impending fiscal cliff results. But gold has been outperforming the S&P since 2001, so it is hard not to be bullish on precious metals and the resource juniors, even if the precious metal stocks had been somewhat overbought as well before the recent dip, helping to generate it. Indeed, after nearly a decade of companies rushing into the sector, we are standing on the cusp of a potential discoveries boom, with numerous companies all across the globe set to realize production on new resources.
Another good example of a serious up and comer among the junior resource stocks is Mawson Resources Ltd. (OTCPK:MWSNF), which has quickly distinguished itself in Finland and Sweden, recently (Oct 29) clocking in outcrop grab samples on their flagship Rompas-Rajapalot project in northern Finland as high as 2,817g/t Au, with a 52 sample average in the 152.8 g/t range. With choice plays like this floating around, investors have a good way to turn a profit off the long-term effects of profligate government spending and endless money printing by central banks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.