"Junior Gold Miners Versus The Big Producers"
As we see the in-flux of “born again” gold-bugs among mainstream market commentators, there has also been a commensurate increase in articles about the gold miners. Many “experts” who only a couple of years ago were shunning gold as a “barbarous relic” now feel qualified to “recommend” individual gold miners to their readers.
To the credit of a few of these individuals, they have done their “homework”, and offer credible analysis and insight on the companies they cover. However, the majority of such pundits haven't learned the various quirks of this sector which make it different from all other commodity-producers. They engage in simplistic balance-sheet analysis which leaves investors dangerously uninformed about factors which have tremendous significance in the current and future performance of these companies.
In particular, we have numerous analysts touting the large gold-producers to their readers and clients, despite the consistent failure by most of these companies to deliver good “returns” to shareholders. Meanwhile, the smaller producers – the “junior miners” - have provided investors with many spectacular success-stories, with the best clearly still to come.
The leading “voice” when it comes to warning investors of the potential pit-falls of the larger mining companies is Jim Sinclair. He has told investors on countless occasions that many of these companies were carrying dangerous/destructive “gold derivatives” on their balance sheets – courtesy of the big-banks.
These derivatives were either incorporated into their operations as merely “hedges” against the gold-price or were a necessary condition in order to obtain financing for large, capital projects – such as the construction of a new mine. We’ve seen the results of these “deals with the devil” show up on the bottom-line of these mining giants: the complete inability to “leverage” the price of gold – either in terms of their own profitably or in returns to shareholders...
full commentary: http://www.bullionbullscanada.…old-commentary&Itemid=131