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Tracking Junior Miners - Why Are they Underperforming?


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The Start of Something Good?

 

cdnxtogoldjt4.png

 

It has pushed up to the downtrend line ... And this time it does not look over-extended.

We should know whether it can make it through this line within this week

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With the performance of juniors in the UK of late a prediction from Jim Sinclair for a bit of cheer. The CDNX looks like it also needs a bit of cheer after the last couple of days.

 

Author: Jim Sinclair

 

Dear Friends,

 

There are two subjects of extreme importance today.

 

I sent you an email months ago saying, ?This Is It.?

 

1. I am now telling you, ?It Is Now.?

 

Gold is preparing for an assault not on $1000, but for a brief penetration of $1200.

Violent chopping will occur, then off it goes to $1650.

 

This violent chop we have been living in here and now will resolve itself very soon and the take will be seen by history as having occurred in this last formation HERE AND NOW.

 

2. Where your juniors are concerned please give equal attention to the fundamentals before you make any decision. When beaten down, as they have been, think about gold at $1200 and $1650 coming sooner than anyone expected.

 

Call the company and respectfully demand to speak to management, not an IR officer. If management is in the country but will not speak to you, put that in the debit column. Allow time for a call back as many other investor may be doing the same thing.

 

The questions are simple. Property, finances and costs are the subjects you approach.

 

As an example, a high cost mining company in Ghana just experienced an increased production cost per ounce of gold as a byproduct of increased electrical costs in the country. Before you push the panic button the question to the company is ?What are your total costs per ounce, not cash cost?? Once you have that answer think about gold at $1650.

 

I will discuss the ?why? of all this on www.JSMineset.com this evening.

 

Respectfully yours,

Jim

 

__________________

 

.

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Gold stocks (GDX) are finding a bid, as Gold (GLD) drifts off its highs

 

GDX Last [Tick] 49.0700[ + ]

Change 2.4000

% Change 5.14%

 

Day High 49.0899

Day Low 47.96

 

GLD Last [Tick] 94.9100[ + ]

Change 1.3800

% Change 1.48%

 

Day High 95.50

Day Low 94.2552

==============

 

Meantime:

CDNX : 2,369.86 Change: -13.79

Open: 2,386.89 High: 2,395.12 Low: 2,367.12

Volume: 102,400

Percent Change: -0.58%

 

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Thoughts About the Bear Market in the Junior Sector

 

http://www.safehaven.com/article-10729.htm

 

For several months now, junior resource stocks have been in a highly depressed state. Many juniors are now testing their 2-3 year lows despite the commodity bull market raging strong. As stock prices remain depressed, financial positions of these junior exploration, development and production companies are deteriorating.

 

If I was a bit more clever I'd quote bits and highlight the important stuff with red text, but never mind :) It seems to be banging on the same drum as many people here.

 

 

 

 

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Looks like CDNX has broken support to the downside.

 

A sad day

 

 

2,300 may yet give support looking at the 3 year chart.

 

Just watched an interview with Jim Chanos and a former SEC chairman on Bloomberg talking about the ban on naked shorting, Chanos was quite clear that it was the smaller caps that were attacked by naked shorting and there is always stock available in large caps.

 

Will the naked shorting ban help juniors, we'll see.

A few takeovers wouldn't go amiss !!

 

.

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Still no breakout for Juniors / CDNX

 

aaccvq6.png

 

I don't think the minor breakdown is a big worry - yet

 

As mentioned in Rubino's note... EXCERPT:

 

Louis James is seinor metals analyst with Casey Research, publisher of several highly-regarded precious metals newsletters and generally one of the best sources of junior miner research. He likes the following:

 

Silvercorp (SVM.TO). “Great company with a huge profit margin and fantastic blue sky, hammered hard now for no reason. Buying now could force the shorts to eat their shorts, driving the share price even higher. Company has tracked silver for years, and we expect it to do so again for years to come.”

 

AuEx (XAU.V). “Great project generator, following the JV model with exemplary success. Has substantial stake in several projects with potential for large gold resources (over 1M oz), with work being paid for with Other People's Money. Top management.”

 

Andina Minerals (ADM.V). “Not cheap, but has a genuine monster gold deposit in hand, and it's getting bigger. Excellent infrastructure advantages, new resource calculation due out soon.”

 

 

Claude Cormier, publisher of the OrMetal Report, has almost made me rich once already. Back in 1998 I wrote a column on gold stocks for TheStreet.com that featured his favorite juniors. One of them was Glamis Gold, which looked promising at $1.50. I bought 10,000 shares and when it doubled I sold, feeling pretty smart. Then I watched from the sidelines as it kept on rising, eventually being bought out for around $40. In other words I could have had a seven-year all-expenses-paid vacation by just holding onto that one stock. So Claude has massive cred here at DollarCollapse. His current take:

 

 

It is not an easy task to give you my favorite gold stocks in this market because there are so many to choose from. The junior market is truly at bargain levels.

 

At the top of my list is Canplats Resources (CPQ.V), an explorer with a new discovery in Mexico not far from Goldcorp's Penasquito mine. I am guessing that they may have found as much as 3 millions ounces of gold plus good quantities of silver, zinc and lead. The deposits are open in most directions and are growing steadily.

 

My second choice, which could really be in first place as well, is Chesapeake Gold (CKG.V), which has a huge open pit deposit in Mexico containing 20 million ounces of gold, 380 millions ounces of silver plus some zinc. They want to maximize the use of conveyers instead of feeding a truck fleet with expensive oil. This could have a major positive implication for costs.

 

In third position is Detour Gold (DGC.TO) which is developing the Detour Lake deposit in Ontario. It just released an update showing 11 millions ounces of gold. The exploration program is proceeding and more gold will be found. We came in late on this one, so it is no longer a huge bargain. But it should eventually be taken over by a senior company.

 

== ==

 

BE CAREFUL of Silvercorp

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FEEDING ON ITSELF

 

One of the reason that Junior miners are under-pressure:

 

RAB's funds are experiencing some heavy redemptions, and

RAB Special situations fund (RSS.L) has sold off with that ... update

 

bigfc0.gif

 

We are seeing this in the pressure on the stock

 

RAB SPECIAL SITUATIONS COMPANY LIMITED (the "Company")

The Directors today announce that the estimated Net Asset Value per Ordinary Share based on the estimated value of the RAB Special Situations Master Fund provided by the Investment Adviser as at 10 July 2008 including income was 111.68 pence.

 

It closed Friday at 62.0p - that's a big discount to NAV

 

Date=== Open High= Low= Close Volume Adj Close*

18-Jul-08 63.00 63.60 62.00 63.60 27,300 63.60

17-Jul-08 62.75 64.00 62.00 63.60 35,000 63.60

16-Jul-08 64.00 64.19 60.00 61.59 158,500 61.59

15-Jul-08 72.00 72.00 63.00 63.00 571,100 63.00

14-Jul-08 74.50 75.20 70.00 72.00 469,000 72.00

11-Jul-08 74.00 73.00 72.00 72.02 529,800 72.02

10-Jul-08 74.00 76.00 72.00 76.00 63,700 76.00

9-Jul-08 77.50 78.25 73.00 75.00 586,100 75.00

8-Jul-08 80.50 81.00 76.00 78.40 41,700 78.40

7-Jul-08 86.00 85.00 79.00 80.15 210,800 80.15

4-Jul-08 86.00 86.50 85.00 85.00 14,000 85.00

3-Jul-08 88.25 87.40 85.00 86.60 28,900 86.60

2-Jul-08 95.75 96.00 88.01 89.25 84,200 89.25

1-Jul-08 98.00 96.75 94.00 95.50 39,000 95.50

30-Jun-08 99.25 97.75 96.50 97.01 67,000 97.01

 

Pressure from:

JP Morgan Asset Management (UK) Limited - sold 1 million shares (down to 3mn shs) recently

/see: http://www.digitallook.com/news/rns/220391...in_Company.html

 

JPM account for a big percentage of the recent sales:

bigsu8.gif

 

Date of the transaction (and date on which the threshold is crossed or reached if different) (v):

03/07/07

6. Date on which issuer notified: 08/07/07

- It looks like JPM may have continued to sell for a few days

 

Here's RAB Capital (RAB.L /parent co. of RSS's manager) ... update

bignx2.gif

 

The blue line above is CDNX. The highs and lows of RAB and RSS correlate well with that.

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hmmm....................intersting

i dont see how jpm selling rss affects junior stock prices as its a closed end fund

i have been unabke to find what they hold - little help here http://www.investegate.co.uk/Index.aspx?se...rds=rss&Go=

none here http://www.rabspecialsituations.com/investment_objective

dak what they hold?

the discount looks tempting, but not knowing what they hold and how the holdings are valued its a real pig in a poke (is nrk held at cost, i wonder?)

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hmmm....................intersting

i dont see how jpm selling rss affects junior stock prices as its a closed end fund

 

the discount looks tempting, but not knowing what they hold and how the holdings are valued its a real pig in a poke (is nrk held at cost, i wonder?)

 

JPM's find is obviouslt getting redemptions too.

And in selling, they may be reacting to rumors that the open HF underlying RSS is getting hit

with huge redemptions

 

I am very tempted, and may buy some this week

 

Bubb,

Co-incidently I was looking at hedge fund redemptions as a possible subject for this week's MM. Do you ming if I use some of your ideas?

 

Sure. I think we heard some of this from the same source

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i would have thought jpm were selling either because they need the cash or they dont like investments like nrk nad A1racing

"open HF underlying RSS" what are you refering to here? i thought the master fund was a subsiduary of rss fund

thanks to gtcharlie on iii post 9/7/08 http://www.iii.co.uk/investment/detail?cod...amp;action=list

throws some light but gives no idea of the nrk situation and omly list the n american cos

his data comes from http://www.secinfo.com/$/SEC/Document...2D+Schedule+13G

my suspicion is taht nrk is still held at cost and could be revalued at zero when all the dust has settled - a good reason for jpm to sell?

dak how much they paid for nrk??

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i would have thought jpm were selling either because they need the cash or they dont like investments like nrk nad A1racing

"open HF underlying RSS" what are you refering to here? i thought the master fund was a subsiduary of rss fund

thanks to gtcharlie on iii post 9/7/08 http://www.iii.co.uk/investment/detail?cod...amp;action=list

throws some light but gives no idea of the nrk situation and omly list the n american cos

his data comes from http://www.secinfo.com/$/SEC/Document...2D+Schedule+13G

my suspicion is taht nrk is still held at cost and could be revalued at zero when all the dust has settled - a good reason for jpm to sell?

dak how much they paid for nrk??

 

Yes. Very possible

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Extracts from one of Jim Sinclair's posts today:--

 

Dear CIGAs,

 

“US CFTC CHARGES DEFENDANTS WITH 'BANGING THE CLOSING PERIOD' OF OIL MARKET TRADE”

 

Are you totally blind?

 

Today you read a post from Trader Dan concerning chart painting, but you still continue to push the panic button, letting yourself be bamboozled by those short the junior gold shares.

 

This day’s action has all the markings of the MANIPULATION resident in the commodity markets.

 

This gold reaction has no legs. The third try at $1000 stands right in front of us. ------

 

 

Today has all the earmarks of a Hail Mary play in the juniors hoping to break the back of investors.

 

Look at the HUI which shows you the “BANGING THE CLOSING PERIOD” of the junior golds. The cheapest gold entities are the bombed out juniors that are real companies not starved of operating finances with viable properties. They will appreciate 1000%.

 

Before you break out your razorblade kit and head for the bath look at the HUI and know gold is going above $1000 very soon.

 

If you do not see what is happening then you are totally BLIND to how you are being bamboozled!

 

_______________________

 

 

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Kinross just took out Aurelian

 

"Kinross Gold Corp. agreed to buy Aurelian Resources Inc. for C$1.2 billion ($1.18 billion), gaining the largest gold deposit in Ecuador, where mining was halted in April pending a new minerals law.

 

Kinross will swap 0.317 share for each one of Aurelian's, the company said today in a statement. That's a 48 percent premium, based on yesterday's closing prices. Toronto-based Aurelian jumped as much as 69 percent on news of the buyout, which also includes Kinross warrants."

 

Cheap buy for them. The big question, who's next?

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  • 3 weeks later...

0811_clip_image002_0004.jpg

 

On the technical front, their no argument that mining stocks are oversold, with the ARMS Index near record high values, and the Summation Index pushing new all time lows. Unfortunately, there has yet been much evidence of positive divergence on the charts and what base building had been underway seems to have been undermined rather substantially by the break down in large cap stocks over the last two weeks. While the majors are also very oversold, it remains to be seen whether Junior miners will experience a substantial trading bounce in sympathy with the majors should the major establish an important low at these levels.

 

0811_clip_image002_0003.jpg

 

Frank Barbera: http://www.financialsense.com/metals/FSJG/2008/0811.html

 

Adding some support levels, there could be some way to go...

aaa2nq6.jpg

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AIM listed Avocet Mining today announced it has made a significant reduction in it's gold collar hedge position to increase exposure to the spot price.

 

Avocet completed it's buy back of sold call options on Aug 15th over 65,000 ounces of gold with a strike price of $755, a reduction of 34% from it's previous collar hedge position. This means all gold sales will be at spot prices, or $600 dollars if higher, up to at least June 2010.

 

As a junior that shows very strong confidence in itself and that the present dip in gold is a bullish opportunity.

 

They could be pretty much spot on with their timing.

 

.

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