From The Gold Report:
What if the shockingly low valuations of some junior mining companies are really all they're worth? As the market shakes off years of exuberance, Brent Cook, co-editor of the Exploration Insights newsletter, searches for the truly undervalued – finds as rare as gold itself. In this interview with The Gold Report, Cook talks about high-margin deposits that the rest of the market can't see.
The Gold Report:
Brent, 2012 was difficult for many gold investors, and you paint a pretty bleak picture for certain junior mining companies in 2013 as well.
We've actually had two pretty tough years on the TSX Venture Exchange. It is off about 30% from its peak in 2012 and around 20% for the year. That comes on top of a 35% decline in 2011. I do think much of the froth is washed out and we will see some opportunities in 2013.
During the most recent boom years, 2009 and 2010, roughly $11 billion ($11B) was raised on the Venture Exchange. Most of that has been spent without much success.
Going by John Kaiser's database of about 1,800 Venture Exchange listed companies, there are around 600 that now have less than $200,000 in the bank and a full 62% of the 1,800 companies have a median working capital of only $1.1 million ($1.1M) or less.
These companies are trading at less than $0.20/share, which means that unless things improve dramatically in the next year, many of these companies are going out of business or will push excessive dilution on current shareholders just to stay alive. The Venture Exchange will truly be the land of the walking dead.
This coming year will be a cleaning-out process that in the long run is good for the sector...
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