Cashless juniors! Off with their heads! – by Kip Keen (Mineweb.com – January 21, 2013)

http://www.mineweb.com/

Watch out for the coming junior zombieland – for both danger and opportunity as cash-poor juniors are culled, say Kaiser, Coffin and Roulston.

VANCOUVER, BC (MINEWEB) – It’s not a new call, a new argument, a new macabre hope for the end of what some consider a worthless class of underperforming, cashless and asset-poor juniors.

But calls for the culling of a fair chunk of juniors on the TSX Venture Exchange are undoubtedly growing and were especially evident in Vancouver on Sunday in the presentations of newsletter writers to the Cambridge House investment conference.

One of the closest to the subject is John Kaiser, of Kaiser Research, who, since about mid last year, has been putting hard numbers to the otherwise obvious reality that faces or will face juniors that have not been able to replenish their cash piles for some time over the past year or so.

Since climbing Mount Exuberance in 2010 – having fallen off it in 2008 after an equal peaking – investors have refused to fund the exploration plans of many juniors. That of course is a serious problem for an endeavour that is predicated on the pursuit of the big payoff but does not, by and large, generate revenue to get it there.

It does not help that many juniors, having received loads of cash in the past five years, have not, despite their best efforts, made a plethora of major discoveries the likes of which inspire even the slow ink of backwater community newspapers. More importantly, the kind of discoveries that, the argument goes, can inspire risk taking.

Among junior watchers Kaiser has put the greatest effort into chronicling the imminent doom over which many others also fret. Kaiser recently expanded on the issue in blog postings pointing out that, of some 1,400-odd juniors on the TSX-Venture nearly half – 632 – have less than $200,000 in the bank.

Of course, running a serious exploration company, with grand exploration plans, multiple staff, including geologists that no longer come cheap, in any number of jurisdictions while paying lawyers and listing fees with that much money at hand, is sort of like trying to build a coliseum with proceeds from a six year old’s lemonade stand.

Kaiser’s argument, expanded at some length in the link above, comes down to the probability these most of these cash-poor juniors will vanish and, in turn, that this will be good for coming exploration investment.

“The departure of 500 resource juniors would be a healthy development for the sector because when the retail investor does return to this sector, we want the field of choices not to be diluted with worthless distractions,” Kaiser recently wrote.

Eric Coffin, of Hard Rock Analyst, noted in a presentation Sunday that we “need to see 500 [juniors] or so go away”.

Lawrence Roulston, of Resource Opportunities, also speaking Sunday, put it in terms of the market bottom that we may not yet have reached on the Venture.

Roulston said there were many juniors whose “Fundamental value is zero.” Thus the cent or two in value the shares of these juniors enjoy rather distorts the Venture upward, he argues. By extension, with more junior extinction, there is, according to Roulston, still some ways to fall on the Venture, assuming few make notable gains on the whole.

Kaiser rendered his opinion on the majority of the 632 juniors with less than $200,000 as this: “Most of them are useless companies that pretend to be in the exploration game.”

For the rest of this article, please go to the Mineweb.com website: http://www.mineweb.com/mineweb/content/en/mineweb-junior-mining?oid=173763&sn=Detail

 

 

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