Gold Miners: A Junior Trio

03/18/2014 9:00 am EST


Brien Lundin

President, Jefferson Financial, Inc.

A primary factor driving gold right now is the huge flow of gold from Western speculators to Eastern savers, also known as the battle of "paper gold" versus "real gold," explains metals sector specialist Brien Lundin, editor of Gold Newsletter.

We’ve seen a historic shift in Asian demand. Not just bargain hunting, but a major surge in everyday buying that refuses to wane.

From 2000 to 2008, the major rallies in gold occurred whenever—for whatever reason—the Western and Eastern markets were both buying. We haven’t seen this phenomenon since the rebound from the credit crisis of 2008. Now we may be seeing it again.

Meanwhile, the sentiment for gold, silver, and the mining stocks is improving rapidly. More broadly, junior companies are becoming more confident in getting back to work as their share prices improve.

With its acquisition of PMI Gold now complete, Asanko Gold (TSX:AKG) is embarking on the task of putting the newly enlarged company’s multi-million-ounce gold resource into production.

I like Asanko’s aggressive move into the ranks of mid-tier gold producers. Even in the current, volatile market for gold, Asanko’s scalable, open-pittable deposits in Ghana give the company a clear view to cash flow in the next couple of years.

The fact that it has financing in place, and will move forward toward production while most of the world’s undeveloped gold resources will continue to lie fallow, separates Asanko from the pack. It continues to be a buy.

With an exploration update from its Akarca project in Turkey, a royalty deal on the Timok copper-gold properties in Serbia, and the closing of an option on its Koonenberry project in Australia, Eurasian Minerals (SCT:EMX) reminded investors how faithful it is to the prospect generator model of mining exploration.

These latest also remind us how nimble this management team can be and how much news flow the company generates, even during unsteady times. It remains a solid bet on the long-term prospects for precious and base metals and a buy.

A new buy recommendation, Midland Exploration (MIDLF) is a well-funded junior explorer with a wealth of great projects in mining-friendly Quebec.

Midland is a prospect generator, one that has had great success attracting partners to fund exploration work on its many projects. Management runs a tight ship, and its miserly cash burn rate gives it the ability to survive, and even thrive, in the current market turmoil.

Its projects run the gamut, from gold, to platinum-group metals, to base metals, and rare earths. Many of these properties are in the backyard of world-class metals deposits.

In short, Midland offers a winning combination of great projects, news flow, and the potential for an explosive share price move, should one of its JV partners hit paydirt. It’s a strong buy and a solid addition to our buy list.

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