Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Posts Tagged ‘junior gold miners’

High Risk to Start the New Year

By for Profit Confidential

High Risk to Start the New YearHappy New Year to our Profit Confidential readers!

In 2012, small-cap stocks were the second-best performing group, following the technology sector. The Russell 2000 was the top performer in December and has been since the end of the first quarter. How the small-caps fare this year will, again, depend on the global economy.

My stock analysis is that what happens in January will be an important indicator for the year as far as performance. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to the Stock Trader’s Almanac. In 2012, January was a strong month, so it was not a surprise to see the relatively good advance in stocks.

As we move into 2013, the focus will be on any remaining fiscal cliff fallout and the impact of the deal, along with the eurozone mess, the U.S. national debt, and jobs growth.

For 2013, my stock analysis is cautious to start the year, based on the high global risk.

The fact that the economy is triggering some jobs growth is encouraging. My analysis is that this will likely continue in 2013, although the unemployment rate is expected to remain relatively high at over seven percent.

My stock analysis tells me that we need to see leadership from such areas as the financial and technology sectors. The big banks were strong in 2012, but we also need to see technology take a leadership role.

It definitely will be a tricky year, given the global and domestic issues, along with suspect earnings and revenue growth to start the first quarter, which you can read … Read More

Mining Stocks—They’re Down, But Not Out

By for Profit Confidential

 junior gold minersGold has shown some good support and buying after recently declining below $1,550. The June gold remains extremely bearish on the charts and is searching for oversold buying support at around $1,500 to $1,525. So far we are seeing support emerge on weakness.

I continue to like gold going forward given the possible exit of Greece from the eurozone after the failure to form a coalition government. New elections are set for June 17, but the uncertainty will be an overhang on equities. A number of Spanish banks were also downgraded, as the 10-year bond yield surged towards seven percent, which inevitably is not sustainable for the country given the current weak financial position.

As I discussed in recent commentary, I do not feel it is time to dump gold stocks and I believe that major price weakness should be viewed as an opportunity to accumulate stocks.

I favor the metal plays and continue to smell opportunities, especially in the mining companies and junior gold miners.

China and India continue to be the world’s top buyers of gold and this is expected to continue. The Chinese have also been buying mining companies around the world in an effort to increase its reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground waiting to be developed and needing a cash-rich partner to get the ore out of the ground.

You can consider buying the major gold players such as Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), and Newmont Mining Corporation (NYSE/NEM), as … Read More

Mining Stocks: Six Potential Moneymaking Picks

By for Profit Confidential

gold stocksWe are seeing some calm return to the equity markets after Greece managed to convince its debt holders to take a loss of over $200 billion. The aftermath has hurt gold, as the precious metal has hit a snag; it’s down below $1,700 and looking to a possible retest at $1,600. A break below could send the precious metal down to $1,525.

With the current weakness in gold, I do not feel it is time to dump gold stocks and I believe major price weakness should be viewed as an opportunity to accumulate stocks.

I favor the metal plays and continue to smell opportunities, especially in the mining companies and junior gold miners.

China and India continue to be the world’s top buyers of gold and this is expected to continue. The Chinese have also been buying mining companies around the world in an effort to increase the country’s reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground waiting to be developed and needing a cash rich partner to get the ore out of the ground.

You can buy the major gold players such as Free port-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), and Newmont Mining Corporation (NYSE/NEM), as I discussed in The Gold Stock at the Top of My List, but for an opportunity for some real big gains, you need to own some of the smaller miners.

If you want to play the small mining companies, there are hundreds of plays.

I have listed several small … Read More

Mining Stocks: Four Potential Takeover Candidates

By for Profit Confidential

mining companiesFollowing the news of Glencore International plc’s purchase of Xstrata Plc, which will create a diverse firm involved in a variety of precious metals, there is increased investor interest in mining companies, with everyone looking over their shoulder, asking, “Who’s next?”

Since the deal is so large, this essentially raises the bar for other mining companies about who can be acquired and for what price. It used to be that only small, junior gold miners and other precious metals firms were the ones to be bought. This deal opens the doors to larger mining companies and throws down the walls for more mergers by precious metals firms on a large scale.

Mining companies are sitting on a ton of cash, as precious metals prices remain strong. Looking at one segment of the precious metals space, gold miners’ per-share cash flow and earnings reached the highest level in nine years during the third quarter of 2011, according to Bloomberg. This positive cash flow is being seen by most mining companies in the precious metals space.

Economies of scale are another driver for precious metals mining companies. As mines are becoming more complex and it’s becoming more difficult to extract precious metals out of the ground, mining companies are being forced to partner up with or sell completely to larger mining companies with more capital to develop the properties. This large scale allows mining companies to lower operation costs. Small junior gold miners simply don’t have the same cost of financing or technical knowledge in-house as large mining companies do.

 With the price of the Glencore/Xstrata deal worth approximately $41.0 billion, … Read More

My Market View: A Risky Start to 2012

By for Profit Confidential

My 2012 Market View: High Risk to Start OffHappy New Year!

In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.

The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.

I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.

For 2012, my market view is cautious to start the year based on the high global risk.

The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.

This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.

My market view is that we need to see leadership from such areas … Read More

Tips for Investing in Gold: What a Great Junior Miner Looks Like

By for Profit Confidential

In its fourth quarter of 2010, the company’s total sales were $26.2 million, representing substantial growth of 53% over revenues of $17.1 million generated in the same quarter of the previous year. That’s way better than a technology stock. Earnings for the fourth quarter of 2010 were $4.6 million, or $0.15 per share, compared to breakeven net income of $0.1 million, or $0.00 per share, generated in the fourth quarter of 2009. For all of 2010, the company’s revenues were $90.8 million, compared to $71.9 million in 2009. Earnings for the year were $9.0 million, or $0.31 per share, compared to $0.3 million, or $0.01 per share, in 2009.

Futures & Fortunes — Waiting for the Next Big Trade

By for Profit Confidential

It doesn’t really matter what’s happening in the broader market. If you own gold or silver, you’re a very happy investor. I think gold will run to $1,500 an ounce, perhaps by the end of the year. With investment risk high in equities and yields low in bonds, institutional investors are jumping on the golden bandwagon. The trend is definitely your friend in the futures market.

It really is boom time in the gold business and companies are easily able to raise equity funds to explore for the metal. The fundamentals for strong gold prices are solid. There’s a recovering global economy, a weaker dollar and big increases in money supplies among most Western nations. It really doesn’t get any better if you’re a gold bug.

Along with gold, plenty other precious metals are also going up in price and this sectoral price strength really helps mining companies. Even at a designated gold mine, companies often dig up a lot of silver, copper and other precious metals. The price strength in a group of metals just goes right to the bottom line.

Along with these record spot prices comes the risk of a major correction. These are commodity futures markets after all and volatility is the name of the game. But it seems probable that the longer-run price trend is intact for gold and silver. Copper will benefit from Asia’s economic recovery. I wouldn’t call my broker and load up on gold stocks right now. The big money has already been made. But, if we get a meaningful correction and you don’t already have some exposure to the sector of … Read More

Look for Profit Among Junior Gold Miners

By for Profit Confidential

In the last few trading sessions, gold has been steadily assaulting the $1,300-an-ounce resistance level. It appears that very few traders doubt it will hit that new high in the near term, considering the recent high on the spot market of $1,278.90 per ounce of gold. Of course, whenever gold rallies this strongly, the inevitable question on investors’ lips is: how much upside momentum is still left in the bullion and, more importantly, how could they make the best of it while the gold is still surging?

Gold bugs believe that there is plenty of upside momentum left and they are framing it in terms of years, not months. Their reasoning appears sound — there are so many factors driving the price of gold upward, such as volatile currency markets, über-sized government deficits, more economic stimulus potentially creating an inflationary wave, and the still weak global economy. Neither of these factors is likely to back down anytime soon and thus neither is the price of gold.

The good news this time is that not only gold bugs are preaching to the choir. It seems that quite a few respected gold analysts also believe gold is truly in a long-term bull market. Additionally, gold fundamentals support the argument that gold is not likely going to morph into an asset bubble.

As far as future gold price predictions go, some gold analysts are rooting for the gold price of $2,300. Why this price of $2,300 per ounce? Simply, the price of $2,300 per ounce of gold approximates the price that gold had reached in January 1980 after inflation is taken into the … Read More

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