Juniors Sentenced to Death ?
by Eric Hommelberg
September 17, 2008
It sure has been a brutal year for the junior sector so far. The horror show has decimated most juniors and many are trading at levels not seen since the beginning of this bull market in 2001. Does it mean the death of the juniors? Although most people would tend to believe that would be the case indeed one has to remember that we were there before in 2001/2002. Juniors were trading at penny levels coming down from multiple dollar levels the years before. In 2003 however many juniors caught tail wind and appreciated by 1000% or more in just a year.
It's all about perception..... Milly !
Let me give an example here:
Samex, a junior exploration company that I’ve been following for years traded at 5 cents back in February 2002. Its market cap had evaporated by more than 98% over the years before. You may guess what sentiment was at that time. Well, I can tell you, it wasn’t good. But then suddenly out of the blue its share price jumped by 100% in a single day to 10 cents and within 18 months the stock appreciated to a high of $1.60. The company didn’t show off any drilling results during that period and nothing spectacular had happened. So what did cause the run (along with the entire junior sector) then? The answer is simple. Perception changed. You simply can’t value a junior without proven resources, it’s all about perception and expectations. Perception can change overnight and once it does change things can go very fast. Now fast forward to today, needless to say that sentiment has rocked bottom again but the same applies today as it did in 2002. Once perception changes, things can go up fast again. John Embry recently said in an interview with The Gold Report:
John Embry:
Things have gone much farther down than I could have imagined in my worst nightmare. If you are confident that the gold price is going higher, this is an ideal time to be picking away and buying a diversified list of very good quality, cheap juniors. I've made the most money in my life buying things that are out of favor because there's no downside risk, certainly from a fundamental standpoint. When the worm turns, these things could double very quickly. When that happens it'll be hard to buy. Start picking away now, as long as you share my opinion that the gold will see a hefty price rise over the next 12 months.
END.