Is the tide turning for junior gold stocks? – by Lawrence Williams (Mineweb.com – November 6, 2013)

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The AIM and TSXV junior mining indices appear to be flattening, or even beginning to pick up. Is this the time for investors to move in again, or is it another false dawn?

LONDON (MINEWEB) – Junior gold stocks remain close to rock bottom, although the scare stories of the demise of perhaps half the juniors on the TSX Venture exchange for example remain unfulfilled. According to Graham Dallas, Head of Business Development EMEA for the Toronto Stock Exchange, speaking at the Global Mining Finance conference in London yesterday, so far this year only six companies have delisted from the TSXV at their own request, and some of these are dual listed stocks which have reverted to their primary exchange as a cost-cutting measure.

Furthermore none so far have been delisted for failure to meet continued listing requirements. While the remainder of the year may indeed see more delistings it seems to this observer that the predicted junior gold stock Armageddon will not come about. Small juniors have the capability of reducing activities to an almost dormant state, cutting fieldwork, staff and executive salaries to a minimal level and conserving enough cash to pay for their listings and just hang in there until things improve.

There is recognition that the current gold price is around the production cost for many gold miners of all sizes – indeed below it in terms of the latest all-in-sustaining costs (AISC) levels for many (and there are some major analysts who feel the AISC metric still does not cover the full costs of mining gold, maintaining production and looking for replacement resources for many companies.) There is thus a feeling, perhaps unwarranted, that things are unlikely to get any worse and that the gold price is indeed at least finding a bottom in and around current price levels.

Another sign out there, that many juniors will attest to, that even very positive press releases on new discoveries for the explorers rather than boosting stock prices at the height of the downturn, actually led to prices falling as investor attention was drawn back to the stocks making these announcements. More recently good positive news does seem to be able to boost stock prices, not back to prior levels, but at least lift them off their bottoms. Stock indices on the main exchanges on which most juniors are listed, seem to have flattened off after months of steady downturns, and may even be rising.

But perhaps even more significant are the signs that private equity and small specialist funds are beginning to take a strong interest in the junior mining sector. When looking at resource stocks this kind of investor thrives at taking contrarian positions and buying when they see stocks at, or near, their nadir with the potential for strong recovery We are seeing companies, seemingly almost on their last legs, successfully negotiating new financings but, as is the nature of these things, at a high cost in terms of interest rates and warrants.

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