By Kishori Krishnan
What gives with junior gold miners? Many say we haven’t seen anything yet, and that some juniors are set to outpace the pack. But how could that be true?

The fact of the matter is that global gold output has been dwindling by nearly 5 per cent per annum since it peaked in 2001. For the past one decade, there has been hardly any new big gold discoveries. And, the new ones detected in this decade have not been that easy to dig out.

The reasons are clear: all the easy mines have already been explored and the world is clearly heading for a shortage of the yellow metal. Incidentally, the scarcity of world-class gold discoveries is already taking a toll on the mining industry’s bottom line.

In North America, output has dropped over the last decade from 17.06 million ounces in 1998 to 10.59 million ounces in 2008. Historically gold-rich territories like eastern Canada’s Abitibi Greenstone Belt and Nevada’s fabled Carlin Trend have failed to yield any monster gold finds in recent years.

Even geologists are running out of virgin geological terrain that is prospective for the discovery of giant outcropping ore bodies.

So, how can these juniors show off their mettle?

Under the spotlight

What exactly do they have going for them? An attractive price to EBTDA (and price to operating income) ratio like Alamos Gold (AGI), Minefinders (MFL), Oceana Gold Corporation (OGC.TO), and New Gold (NGD) have set for them?

Or does one stick to those with superior ore grades, which should result in a very-low cash-cost? Like what Gold Resource Corp (GORO.OTC), Troy Resources (TRY.ASX), or Dynasty Metals And Mining (DMM.TSE) have going for them?

What about the risky ones, which have a political risk associated with their exploration properties? Like CGA Mining (CGA.TSE), Rusoro Mining (CVE:RML), Capital Gold Corporation (CGLD.OTC), and Castle Gold (CSGLF.PINK), all of which are trading at less than a $1 each.

Why are some junior stocks the fancy of investors? And what do they have to account for their bull run? After all, it should be a matter of concern that some juniors have started outperforming gold, trading at multiples of 100 per cent to 500 per cent of levels seen last year.

Strong growth

Some analysts maintain that Canada’s mid-tier gold producers offer investors an attractive alternative to the senior gold producers.

That despite lacking the liquidity and scale of the seniors, the emerging mid-tiers have the ability to offer more attractive growth profiles as well as the potential valuation rerating as they move up the production chain.

San Gold Corp (CVE:SGR) has been rated `Outperform’, with a $3.60 target price.

Aurizon Mines Ltd (ARZ) has been rated `Market Perform’ with a $6 target price.

Gammon Gold Inc (GRS) has been rated `Market Perform’ with a $10.30 target price.

Credit crisis

The fact of the matter is that people are starting to see beyond the credit crisis. And for those juniors that have good assets and have cash, there appears to be a growing audience.

Take for instance Rubicon Minerals Corp (RMX/TSX), or Lake Shore Gold Corp (TSE: LSG), or Kirkland Lake Gold Inc (TSE: KGI), or Detour Gold Corp (TSE: DGC) or even Osisko Mining Corp (TSE:OSK).

Why, then, are their stock prices going down?

Courtesy: www.goldinvestingnews.com

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