Sprott Global Resource Investments chairman Rick Rule is in Australia this week to explain investors how he thinks they could take advantage of Down Under's junior market.
But together with the list of tips he is willing to share about how to find high-quality companies whose shares are currently going for a steal, he also brought a dim view. According to The Australian (subs. required), the U.S. investor said that most of the about 800 junior miners listed on the Australian Securities Exchange were “worthless.”
“Most of the walking dead juniors, the zombies, are a bunch of liabilities disguised as public companies,” he said in August. “Their assets are liabilities; their financials are liabilities; mostly their managements are liabilities. It's wonderful. Every 5 or 10 years you have this major reset in the junior sector. Although it's extremely unpleasant to go through, it's very healthy.”
In his opinion, there is still significant money to be made when goods are on sale in volatile markets. The trick, he has said repeatedly, is not to buy the sector, but individual issues that are “irrationally” priced down.
Rule’s words echo the results of a recent report, commissioned by Canada’s British Columbia Securities Commission, which states that about 50% of junior miners currently operating in BC won’t be around by 2015.
The grim outlook is also shared by senior geologist Brent Cook, who believes that at least one third of junior miners would disappear by the end of the year.
The latest Ernst & Young’s annual Business risks facing mining and metals 2013–14 report, also support these theories, saying that small firms exploring for mineral deposits worldwide, will continue to be cash strapped for at least another year.
The good news is all of them see quite the light at the end of the tunnel. In Mining Speculator newsletter publisher Greg McCoach’s words: “when the market does recover, it is going to be a screamer.”
Image: Screen Grab from YouTube.