Junior Precious Metal Miners Outperform

Don't they?
After a previous posting on the junior mining index, the obvious question was: do juniors outperform majors? Do they consistently do so? Do juniors also outperform precious metals over the long haul ? There is at least one thing for sure:

Large Miners underperform precious metals
There is plenty of evidence that major gold stocks could not keep up with the rising price of gold. Measured by the HUI/Gold or XAU/Gold metric, major gold stocks manifestly lost track of the gold price evolution on two occasions (See refs: 1, 2):

• at the end of the 20 year bear market in 2000, gold stocks ultimately got shattered as gold bullion bottomed at $250/oz,
• during the autumn 2008 market implosion, major gold stocks dropped vastly more than bullion, which bottomed out barely above $700, losing about 30%, relative to the March-08 peak above $1000/oz.

Major gold stocks never regained their pre-crash value relative to gold. Major silver stocks aren't any better as was shown in a previous posting (Ref. 3). Note that for both gold and silver miners, you may find some happy exceptions to the unpleasant average.

Precious metal mining indices (as HUI or XAU) are composed of mining majors only. So what about junior miners? Do they on average perform any better than large miners? Do they consistently outperform ?

In a previous posting (Ref 4) I have been checking the MVGDXJ, the benchmark index used by the popular GDXJ junior precious metal mining ETF (discussed in an earlier posting: ref. 5, 6).

Novagold

This page contains links to press releases and articles on NOVAGOLD (company website).

Becoming a Pure Gold Play Focused on Donlin Gold

NOVAGOLD offers an unrivaled opportunity for investors seeking leverage to gold. The Donlin Gold project is a uniquely attractive asset which in terms of size, grade, exploration potential, production profile, and jurisdictional safety, is quite possibly the most important project in the world today. NOVAGOLD is well-funded with a cash balance of approximately US$206 million as of August 31, 2013, sufficient to fulfill all of its current financial obligations as well as fund the advancement of Donlin Gold through the permitting process.

Post 2008 lows for miners relative to precious metals

When looking at the relative price level of precious metal miners - as determined by the HUI/Gold ratio, it seems little plausible that gold is in fact barely below its all time high: PM miners look as if their revenues have been falling dramatically. Have investors been dropping their once beloved mining stocks in utter despair?

A Junior Gold Mining Index

March 7, 2011

Those investing in junior gold miners or explorer/developers may scan through their own little universe of stocks they have invested in or are planning to do so. They certainly look at graphs providing the necessary view on historic performance, they compare stocks against one another, but unlike gold mining majors followed by a few precious metal mining indices, there isn’t really an accepted benchmark for juniors. You can read below my comment on this problematic topic: