Rick Rule is chairman, Sprott USA. His focus is on precious metals stocks.
New investing ideas:
- Dundee Corp. (DC.A TSX)
- Delphi Energy (DEE TSX)
- Altius Minerals (ALS TSX)
Past Investing Ideas: August 6, 2013
Virginia Mines (VGQ TSX)
Then: $9.85; Now: $12.78 +29.75%; Total return: +29.75%
Ivanhoe Mines (IVN TSX) - Previously: Ivanplats (IVP TSX)
Then: $1.45; Now: $1.50 +3.10%; Total return: +3.10%
Reservoir Minerals (RMC TSX-V)
Then: $3.26; Now: $6.03 +84.97%; Total return: +84.97%
Total return average: +61.17%
The junior resource sector is in fine shape, having bottomed a year ago in July, and has exhibited a steady, healthy ascent, albeit from a very low bottom. The recovery has been gradual, with advances consolidating – another healthy sign. I expect the current trends to continue: a gradually rising market, with higher highs, and higher lows, but punctuated with the volatility the sector is famous for. Drivers to the upside include a nascent recovery in western economies, merger and acquisition across the resource spectrum, continued strength in frontier economies and markets, and sporadic exploration success. Despite the industries’ whining, capital is very available to deserving projects where managements have realistic cost of capital expectations. Bull markets get going in earnest when expectations for that market sector are exceeded, and expectations for the resource sector are so pessimistic that not exceeding them would be a challenge. At some point in time, probably in the next two years, the top quartile of the junior resource sector will probably “melt up”, to the dismay of most industry participants and pundits.