Gold Explorers - In The Right Location - Will Survive
Jeb Handwerger | Mar 07, 2013 02:36AM ET
In ancient Greece, farmers would plant crops based on prophecies from an oracle. Today investors look to spreadsheets and minute by minute charts to try to predict the future. Trying to be a prophet is an unprofitable occupation. The secret to wealth is buying wholesale, waiting and hopefully selling it retail.
We all love sales and discounts when prices drop for fast food, clothing or cars. However, when it comes to mining stocks investors look for momentum and major price rises continuing to bid up the price to overbought levels. Instead, they should look for quality assets on sale in mining friendly jurisdictions.
The key to making money in the mining market is when you buy not when you sell. Mining equities are priced at irrationally discounted levels and many in the business for many decades have never seen such a disconnect between the share prices and the underlying assets. This may be exactly the time to seize on opportunities of buying mining shares on sale. Wall St. will intoxicate investors with a poison that takes away reason and forces us to follow the flavor of the month. This is happening right now in the ignored and undervalued resource sector and true contrarians who can dismiss the negativity in the market and press could make a fortune if they have patience and fortitude. Technically, gold is basing and should reverse at support and could break out of $1800 later this year.
There is no doubt that 2011-2013 has been one of the toughest markets for junior miners in several decades. Although the 2008 panic was more severe and quick, this 24 month downtrend has been very long in duration and has shaken out the common speculator. Retail and momentum investors believe good times are here again and are chasing the overbought large cap equities into new highs, especially the banking and housing sectors. Contrarian, patient and smart money is stealthily acquiring quality juniors at pennies on the dollar.
The hard asset contrarians like myself realize that Central Banks have been printing fiat currency incessantly over the past decade. Record sovereign debt and Central Bank Balance Sheets should support an eventual breakout for gold and silver into new highs. This will eventually cause speculation to return to the junior mines. New gold discoveries have fallen to new lows despite records amount of exploration capital spent. This may lead to an eventual growth crisis for the gold majors who have made poor acquisition choices in questionable risky jurisdictions.
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Costs at some of these mines are soaring above estimates and increased geopolitical turmoil in less stable jurisdictions has forced the majors to take write downs and reassess their growth plans. Investors may soon shift capital from being on the sidelines or in large cap equities into the more speculative junior miners sitting at multi-year lows.
Despite the bearish markets and irrational price declines, the quality juniors with experienced management teams, exploring in stable mining jurisdictions with supportive backing will survive and separate themselves from the pact. They will come out stronger after this bear market is completed.
This may provide investors with potential long term gains as they are able to buy these quality juniors at ridiculously low valuations. These junior exploratory companies may actually be less risky than large producers with high cost mines operating in dangerous places.
NuLegacy Gold (NUG.V) may be doing it right and at these low levels may provide an intriguing risk-reward scenario. They have an experienced, proven team and are exploring next to the two recent major discoveries in mining friendly Nevada.
Barrick’s Goldrush and Newmont’s Long Canyon are some of mining’s best discoveries in recent years as the resources continue to grow. NuLegacy is next door to both of these properties where a current gold rush is stealthily underway.
The Chief Operating Officer, Dr. Roger Steininger has over 40 years of experience exploring Nevada and is credited with the discovery of the 21 million Barrick Pipeline Mine in the Cortez Trend while consulting with Royal Gold in 1989.
NuLegacy separates itself from the typical junior miner with an impressive partnership with Barrick to explore Red Hill in one of the most exciting areas in Nevada - the Cortez Trend. There have been over 52 million ounces of gold discovered and Barrick’s Goldrush Deposit has grown in the past four years from 2 million to 14 million ounces of gold.
Being partnered with Barrick and next door to Goldrush on the Cortez Trend could soon be very attractive in this environment where Barrick is desperate for resource growth and as speculation returns to the junior market.
Many juniors do not have what NuLegacy offers. A management team with a track record of exploration success, a partner like Barrick and Renaissance and exploration in mining-friendly Nevada next to Barrick’s Goldrush Deposit and Newmont’s Long Canyon Deposit.
Barrick’s Goldrush deposit which is one of the most significant discoveries in the world today sits only a couple of miles from NuLegacy Gold. Being next to one of the great discoveries by Barrick with over 14 million ounces of gold and having the largest gold miners as a partner is a “major” advantage in this market and sets a junior apart from the crowd.
In addition, NuLegacy Gold is partnered with Renaissance Gold on the property right next to Newmont’s Long Canyon called Wood Hills. NuLegacy and Renaissance announced that drilling has already begun.
Newmont eventually bought out the Long Canyon Deposit which was discovered by AuEX now known as Renaissance for billions of dollars. NuLegacy is in the right place with the right team.
NuLegacy Gold (NUG.V) appears to be forming a falling wedge with increasing momentum. This could be indicative of a potential reversal near two year lows. Look for a breakout from the falling two year downtrend at $.14. Notice the strong accumulation and increasing momentum despite the downtrend for the past two years which may be indicating smart money acquiring shares.
Disclosure: Nulegacy is a sponsor on my free website and newsletter.
Listen to my recent interview with the Nulegacy CEO James Anderson below.
Below you may find the video.
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