Ready For The New Junior Mining Sector Bull Market?
Jeb Handwerger | Aug 04, 2015 02:20AM ET
Right now, the investment community regards commodities and junior miners as the ignored red-headed stepchild because they have been in a downtrend for more than seven years. The TSX Venture Exchange is hitting all time lows as this bear market becomes the most devastating in history.
Whenever gold and silver stocks are mentioned, investors relate to the wipe-out in many stocks within this sector. including not just the penny juniors but also leaders such as Barrick (NYSE:ABX), Newmont (NYSE:NEM), Yamana (NYSE:AUY) and Goldcorp (NYSE:GG). Instead of focusing on this beaten down sector, the talk on the street is the high-flying tech sector with such stocks as Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL).
Tech is reaching bubble territory. Apple alone is worth four times the entire mining sector put together. The divergence between tech stocks and mining stocks has once again reached dot com proportions. History may not repeat itself but it tends to be similar.
What we are seeing right now, with a high priced tech sector and the extremely discounted miners, is comparable to the major cycle low at the turn of the millennium. Right before Y2K the dot com’s were reaching a bubble while the miners were completely ignored. We then witnessed a major seven year expansion in the mineral sector, from 2000-2008, while equities underperformed. That was followed by a seven year contraction from 2008-2015 where the tech stocks have been outperforming commodities.
It is possible we are once again at or near the turning point or bottom in the junior mining sector and near a top in the tech sector. Only a handful of the tech high-flyers have pushed equities higher. Already the transports and utilities have been under-performing. It may be wise to hedge gains made in the S&P 500 and NASDAQ and increase accumulation of precious metals and the junior miners which are near historic lows.
Remember, the greatest gains are made in the early stages of a bull market. Early stages of bull markets come after the previous bear market capitulation.
July 24, 2015 may have marked an interim low on the Market Vectors Junior Gold Miners ETF (ARCA:GDXJ) as it experienced a classic bullish engulfing reversal pattern on high volume following a major capitulation. Since that low, support has come into the GDXJ.
If it's the beginning of the rally, follow-through should occur by the end of this week. I am still cautious until I see some additional buying, as precious metals rallies have been fake-outs in the past. In order to confirm the interim low I would like to see some increased buying before the end of this week.
Get The News You Want
1) I recently highlighted Pure Energy Minerals (OTC:HMGLF or PE.V) which just announced an NI 43-101 Inferred Resource on Clayton Valley of 816,000 Lithium Carbonate Equivalent.
Lithium is the one bright area of the resource space as the price has been rising, particularly on Tesla (NASDAQ:TSLA) building a gigafactory in Nevada. Pure Energy has 8000 acres around the only producing lithium mine in North America. Its a brine deposit which is the lowest cost type of lithium to process and its only three hour drive from the gigafactory.
2) I am a shareholder of Fission (OTC:FCUUF) and believe the merger with Denison (NYSE:DNN) could benefit the entire Athabasca Basin. M&A is the name of the game in uranium. Notice the recent merger with Energy Fuels (NYSE:UUUU) and Uranerz and the proposed merger of Fission with Denison and another merger of Uranium Resources (NASDAQ:URRE) and Anatolia. The combined larger entities could attract strategic/institutional investors which could open the capital markets to improved exploration and development budgets. In this bear market companies need to consolidate in order to cut costs and attract major institutional interest.
Now Denison with Fission will have the best portfolio of high grade advanced uranium assets in the Basin plus free cash flow from Denison’s toll milling agreements and management fees with Uranium Participation Corp (Uranium Participation Corporation (OTC:URPTF). Fission shareholder’s will have a major US listing on the NYSE MKT with Denison and a better chance of attracting more funds who have market cap and listing requirements.
Despite all this merger chatter, Fission is hitting and growing PLS by leaps and bounds with just outstanding results.
Also keep a close eye on Fission 3 (OTC:FISOF) and Canex (TO:CSC) which has just begun drilling at Clearwater which is adjacent to PLS and is by far one of the most prospective targets of Fission 3′s immense portfolio in the Basin. This is high risk but the gains can be huge as we witnessed with discoveries in the Basin in the past. Fission’s famous award winning geologist Ross McElroy believes Clearwater may be one of the most prospective targets in Fission 3′s portfolio.
3) Pershing Gold (NASDAQ:PGLC) recently rolled back its shares and uplisted to the NASDAQ. Quite often after such moves, some of the penny stock players sell their shares. It appears there was a high volume reversal just a few days ago. It may be coming off the bottom. It has one of the most advanced mining projects with a permitted mill in Pershing County Nevada next to some of the big boys such as Coeur Mining (NYSE:CDE). They have been hitting amazing high grades and the CEO is former Franco Nevada. He has made major deals with the largest mining companies in the world in the past.
Disclosure: I own Pure Energy, Fission, Fission 3, Canex, Uranium Resources and Pershing Gold. Pure Energy, Fission 3, Canex,, Uranium Resources and Pershing Gold are all website sponsors.
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