Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com Radio: John Embry and Charles Hughes Smith, and your host Chris Waltzek
By: radio.GoldSeek.com

The Dangerous Dream of Secession
By: George Smith

Amid Bad Fundamentals, Gold Sector Rally May Have Begun
By: Gary Tanashian

Bitcoin Proves You Cannot Have Your Digital Cake and Eat it Too
By: Nathan McDonald

Relief Rally in Gold Mining Stocks
By: Jordan Roy-Byrne CMT, MFTA

The Morgan Report's Weekly Perspective
By: David Morgan

Outlook for gold – 2018
By: Alasdair Macleod

Stephen Poloz Right To Be Worried
By: Peter Diekmeyer

The Yield Curve And The Boom-Bust Cycle
By: Steven Saville

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Roughly 1% on the Week
By: Chris Mullen, Gold Seeker Report

 
Search

GoldSeek Web

 
Small-Cap Mining Stocks, Big-Time Opportunity
By: Frank E. Holmes, Chairman/CEO/CIO of U.S. Global Investors, Inc.,

 -- Published: Tuesday, 20 June 2017 | Print  | Disqus 

a.jpg (913×606)

Last month I told you about the upcoming rebalance of the hugely popular VanEck Vectors Junior Gold Miners ETF (GDXJ), and how it would distress shares of junior, small-cap mining stocks. I said then that the rebalance could create some excellent opportunities for astute investors to accumulate high-quality, well-managed producers at discount prices.

That day has finally arrived, bringing with it a tsunami in the junior resource space, as I told Collin Kettell on Palisade Radio the week before. It’s a buyer’s market—if you know what you’re looking for. The last time the GDXJ underwent a rebalance of this magnitude was in December 2014, so I see this as a rare event savvy investors shouldn’t miss out on.

But first a reminder of what’s been happening with the GDXJ. Basically, it had become too massive for its underlying index—composed mostly of Canadian junior gold producers—with assets rising close to $5.5 billion earlier this year, up from $1 billion only last year.

Mo Money Mo Problems

Normally this wouldn’t be such a concern. But the GDXJ was getting precariously close to owning a 20 percent share of several names in its index, which would have triggered all sorts of regulatory and tax conundrums in Canada and the U.S.

So the fund made several adjustments to its methodology, including raising the market cap threshold of allowable companies to $2.9 billion, up sharply from $1.6 billion. This means it can now hold large producers that don’t appear in its index, the MVIS Global Junior Gold Miners Index. It also means that a number of smaller constituents were down-weighted or divested altogether, giving investors less exposure to junior miners than what the fund’s name implies.

Before any of this took effect, though, many investors, hedge funds and other market participants acted on the rebalance news by indiscriminately selling down their junior mining assets. This introduced fresh volatility to underlying stocks and depreciated prices.

The selloff, I might add, was done mostly without regard for the phenomenal fundamentals and growth profiles some of these companies reported.

These Miners Get High Grades

Take one of our favorite names, Wesdome Gold Mines. The Toronto-based producer has been operating in Canada for 30 straight years as of 2017 and currently carries no debt. Two of its mines, Eagle River and Mishi, are among Canada’s highest-grade gold mines. Last summer, the company made headlines when it discovered gold at its Kiena property in Quebec, sending its stock up an amazing 49 percent to $2.24 on August 25.

2.jpg (600×315)

When Wesdome was added to the GDXJ in March, it cast newfound attention on the $417 million company. Only a month later, the rebalance was announced, and since then, its stock has eased about 19 percent.     

3.png (600×362)

I see this as a can’t-miss opportunity for retail and institutional investors to start nibbling on Wesdome and other junior miners that have been similarly knocked down only because of fund flows.

That includes Gran Colombia Gold, the largest gold and silver producer in Colombia, and Klondex Mines, whose Fire Creek Mine in Nevada was estimated to be the highest-grade underground gold mine in the world. (According to IntelligenceMine, Fire Creek averaged 44.1 grams per metric ton (g/t) in 2015, double the ore grade of the world’s number two project, Kirkland Lake Gold’s Macassa Mine, at 22.2 g/t.)

Gran Colombia announced last week that it produced 15,444 ounces of gold in May, representing a new monthly record for the company. This brings the total amount for the first five months of the year to 68,783 ounces, an impressive 21 percent increase over the same period last year. The Canadian-based producer has a very attractive convertible bond that pays monthly.

I’ve frequently praised Klondex for its frugality, strong revenue growth and exceptional management team. The last time I visited Vancouver, I had the opportunity to chat one-on-one with its president and CEO, Paul Andre Hurt, who has 30 years of experience in high-grade mining. Not only is Paul a highly-respected chief executive in the mining space, he’s also a devoted father of five.

 A Golden Opportunity

The GDXJ rebalance represents a rare opportunity to accumulate high-quality junior producers at discount prices. I always recommend a 10 percent weighting in gold—5 percent in gold stocks or mutual funds, 5 percent in bars, coins and jewelry.

Commodity prices have lately underperformed equities mostly on subdued oil demand growth, with the S&P GSCI commodity index falling about 4 percent over the last month. If we separate the index components, however, we see that precious metals have posted positive gains year-to-date along with industrial metals.  

4.png (600×407)

As I mentioned recently, gold imports in China and India, the world’s top two consumers of the yellow metal, have advanced strongly this year on safe haven demand. China boosted its gold purchases from Hong Kong as much as 50 percent this year to 1,000 metric tons, the most since 2013. India’s imports rose fourfold in May compared to the same month last year as traders fear a higher tax rate on jewelry.

With the GDXJ down-weighting junior producers, investors might wonder how they can get broad exposure to small-cap mining stocks.

Explore one such opportunity by clicking here!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The S&P GSCI serves as a benchmark for investment in the commodity markets and as a measure of commodity performance over time. It is a tradable index that is readily available to market participants of the Chicago Mercantile Exchange.

The MVIS Global Junior Gold Miners Index tracks the performance of the most liquid junior companies in the global gold and silver mining industry.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 3/31/2017: VanEck Vectors Junior Gold Miners ETF, Wesdome Gold Mines Ltd., Gran Colombia Gold Corp., Kirkland Lake Gold Ltd., Klondex Mines Ltd.

U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission ("SEC"). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.


| Digg This Article
 -- Published: Tuesday, 20 June 2017 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.