Trader, stock analyst and publisher of Zeal Intelligence Scott Wright has recently presented a well-written argument that may help those playing with the idea of re-entering the junior resource sector or those who missed the boat last time around, says a report from Silver Investing News.
While investing in the junior resource sector is inherently risky, Wright points out that the economic upheaval that came to a head last year has really separated the chaff from the wheat as shady shell companies and those found to be putting a hundred on ten when it came to their so-called projects began to drop like flies.
Those junior companies with proven assets and strong management have survived to take another run at the next bull.
However, junior resource stocks are currently “experiencing a serious crisis of confidence” as the Canadian Stock Exchange is still sitting at 2003 levels, says Wright.
For those of you who think the commodities bull is dead, Wright asks us to compare today’s commodities prices with what they were when the CDNX was last trading at the current 1100 level.
“The average prices of gold, silver, oil, copper, uranium, and corn are 153 per cent, 174 per cent, 81 per cent, 152 per cent, 304 per cent, and 58 per cent higher respectively in 2009 versus 2003,” according to Wright. “With commodities prices so much higher today, even after the sharp corrections of 2008, how is it possible that the juniors can be so depressed?”
Although some brave investors have returned, the rate has been at a slow trickle and it’s quite possible that many were so badly “burned” that they may never return, he answers.
What affect will decreasing numbers of junior resource miners and investors have on the sector as a whole? How will this in turn affect the commodities markets?
Junior exploration and development work is “a critical component in growing the supply chains of secular commodities bulls,” says Wright. With fewer juniors to do the preliminary E & D work senior companies rely upon, “future supplies will be tighter, thus causing prices to be even higher.”
In essence, such a problem sets the stage for a future commodities bull. Wright expects “the new generation of junior investors” to experience “legendary gains in the coming years.”
Courtesy: Silver Investing News
