Exploring the junior gold mining world

Attended the first day of the 121 Mining Investment conference yesterday at a very pleasant new London conference venue.  The format of the conference is to have a good number of promising junior miners and explorers (over 30 of them at this event) give ten minute presentations on their projects, but facilitate also the opportunity for one to one meetings with potential investors alongside.  These one to one meetings were available in special company-designated rooms and pods allowing for completely private discussions rather than via the open exhibition format favoured at some other events.

The corporate presentations are also interspersed with keynote addresses and panel discussions from analysts and traders, which makes the whole event an even more valuable experience for attendees.  The organisers hold similar events in Hong Kong and Cape Town and are considering a new event in New York.

The problem for the attendee of course is that every junior will have a good story to present or they wouldn’t be there and one has to try and separate the wheat from the chaff.  As one presenter noted many of these projects are run by geologists who may have invested years of their lives in it and believe so wholeheartedly in its value that because of their emotional involvement may not be the best people to bring such a project to fruition.  One should view the presentations with this in mind and also discount, perhaps, those which are obviously run by out and out promoters.

However, there are always some standouts, but their relative values can be so dependent on external factors which are totally outside the company’s control like metal prices, currency parities and political environment which can at a stroke can take a project value from very positive to near zero. Mining is a risky business at the best of times and juniors represent the riskiest end of it.  Often the most positive gains can be achieved  in what some may consider to be the most difficult of environments.  But it isn’t always the case and depending on one’s risk profile there are always ways of reducing this element of such an investment through careful selection – which is what conferences like these are all about.

However there are some very good potential gains to be made in the sector as the leverage offered by a good junior, particularly when metals prices have been depressed as gold prices have been for the past couple of years, provided one can get in near what proves to be the metal price low point.  Hence the popularity of events like these.  The junior mining market has been particularly depressed with some with good project potential trading at pennies, with potential gains in the hundreds of percents or more should prices truly turn around.

At times like these one can thus lower the risk element in investment by careful selection of projects in what are seen as politically stable environments too.  Take Australian and Canadian gold juniors for example.  These two nations are among the biggest junior gold mining ‘factories’ both with a very strong gold mining history.  Both countries’ currencies have declined fairly dramatically against the US dollar in the past year or so which has totally transformed mining economics in these two nations.  The domestic dollar gold price in both countries, for example, is close to $1600, while both have sufficiently large economies to be able to provide most mining cost inputs in their own domestic currencies and in cost of living terms and local availability of equipment and services they are pretty well on a par with the USA – perhaps cheaper.  So find a long life, good grade gold project run by a junior with decent finances in place in either of these basically politically low risk environments and you are hugely increasing upside potential while reducing risk at the same time.

At the 121 meeting there were indeed several companies which would seem to meet these criteria – in particular from Australia where good junior gold stocks have already had something of a strong run over the past year for the reasons noted above.   But the event was more wide ranging than just a gold show.  Juniors looking at other metals and minerals, most of which have seen similarly depressed prices, featured as well so there was plenty of potential for the risk investor on show.  In short a good event which seemed to be well-liked by attendees and presenters alike.

 

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