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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Monday, March 10, 2008

Why Near Production Junior Gold Miners?

I have been an investor for more than 20 years. For the past 12 years I have earned an annual average return of 35% using a top-down/bottom up, sector rotation approach.

About 60% of my portfolio holdings are now in junior gold miners that are nearing production. What I like about companies at this stage is that they either have or are about to have the resource and infrastructure in place. Now all they have to do is execute according to plan, which can be difficult at times. Going from zero production to millions of dollars in cash flow in the space of a few months can be very profitable for investors. Many of these companies are not on the radar of most investors and have market caps under $100 million. Once these companies begin production, they will be generating positive cash flow and should eventually be recognized by the market with higher share prices.

Junior gold miners in the pre-production phase can also be a hedge against a falling gold price. Though, current trends indicate a rising price of gold in the near future.

Mining is a risky business. A lot can go wrong. But the reward to risk ratio is better than any other investment subsector right now, in my opinion.

I own the following junior gold miners in order of portfolio weighting.

Metanor Resources (25%)
Jaguar Mining (16%)
Gold-Ore Resources (4%)
San Gold Resources (4%)
European Minerals Inc. Warrants (3%)
Minefinders (2%)
Nevsun Resources (2%)
Gold Queen Mining Inc. (2%)

I will be posting my analysis of these companies over the next days and weeks and welcome any comments or questions.

Thank you for visiting the Gold Stock Strategist.


Dan Tyrant said...

Thanks for posting your analysis... I've recently been bitten by the gold bug as well, and started by investing in gold ETFs, but as I've been reading I've come to realize that the real growth potential is in the juniors. The problem, of course, is knowing which juniors to pick, and the way you break down the company's projected valuations is very helpful to a newbie like me. I've been eyeing Metanor for a few weeks, and I think you(and that interview you linked) just convinced me to buy...

Anonymous said...

Great site. I am from VF and will continue to check your updates. Thanks for taking the time to create this site.


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