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

Comments are welcomed!

Monday, June 2, 2008

NEW Emerging Junior Gold Producer Index

The emerging junior gold producer subsector is a very small and unique universe of companies. I have identified between 30 and 40 companies believed to be in this class of companies.

Many analysts use the TSX Venture exchange as an proxy comparison index for small mining companies. It has the advantage of being very broad and the disadvantage of being less reflective of junior gold miners--and even less reflective of emerging junior gold producers.

For purposes of benchmarking emerging junior gold producers that rank high on a cash flow and in situ basis, I have developed an index that includes 17 emerging junior gold producers called the "Gold Stock Strategist Emerging Gold Producers Index (TM)."

This index is necessarily subjective based on hours of study and contemplation. It will be fluid as I find companies that meet the criteria. The most important screen is that the index will not have companies with operations in extremely politically risky countries such as Venezuela and Ecuador. The index also does not include emerging gold producers in South Africa because electricity in South Africa is unstable and mining is energy intensive.

There are 17 companies currently in the Gold Stock Strategist Emerging Gold Producers Index (TM). Each company represents 1/17 of the total index.

The following jpeg includes a ranking based on YTD percentage gains for 2008 along with the overall index YTD. The YTD share price gain for the Gold Stock Strategist Emerging Gold Producers Index is 10.0 percent in 2008 as of June 1, 2008.

Two companies added to my original 15 are Alexis Minerals and Timmins Gold. The top three performers so far this year are Kinbauri, Metanor, and Timmins. I hope readers find this index useful.

Gold Stock Strategist Emerging Gold Producers Index (TM)
(click to enlarge)


Gold Stock Strategist

Full disclosure: I own shares in companies listed above. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their own investment decisions. Do your own due diligence.


MontyHigh said...

I like this Index and would like to contribute. Once we get a list of stocks and when each entered the index I can download prices from Yahoo and create graphs.

Seems to me that most indices have a method of weighting their entries. I recommend equal weighting, but you could consider other weightings (market cap, projected oz per calendar two years out, etc.).

Most indices try to have some objective criteria for inclusion. Seems to me that the kind of criteria you probably want to include are:
(a) Must be financed to be part of index.
(b) Must be projecting at least 30K oz/year in the calendar year after the next one (e.g. 2008).
(c) Other criteria might be: has permits, has NI 43-101 or proven / probable.
(d) Must trade on an exchange where historical data can be downloaded from Yahoo.
(e) What is the criteria for no longer being an emerging Jr? Might it be something like projecting less than a 20% production increase over the next two years or produced more than 200K oz of Au equiv or what.

By the way, a similarly constituted silver Jr index would be quite interesting.

Right now if we do historical charts including stocks that currently meet the criteria, but didn't previously meet the criteria we have a survivor bias which overestimates the returns that can be expected from these stocks. By survivor bias I mean there are other Jrs that wanted to be producers but never met the criteria.

Anyway, let me know if you'd like to work together. At a minimum, I could throw together a program that allows you to create a stock chart for your index.


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