Natural Resources Stocks: A speculative miner

Posted May 21, 2008

“Either commodity prices must fall or junior miners must rise and close the gap. I don’t see commodity prices falling significantly from present levels. They stand as protection against currency debasement which happens to be a growth industry these days.” — Russell McDougal

Blogger’s note: Russell McDougal has spent the last 15 years studying the gold, silver and resources markets and finding exploration and development gems for his readers in Investor’s Daily Edge. Today he told subscribers about a small Canadian miner that he calls an “extra cheap lottery ticket.” It’s speculative buy, but I thought you’d appreciate a look. You can find the article here or read on for more.

by Russell McDougal

Baltimore – (TFN): You likely know that my specialty niche is Canadian resource exploration stocks. These small cap companies are notoriously volatile. They aren’t quite free these days but they are ridiculously cheap.

Why exactly has this happened? Especially when commodity prices are soaring pretty much across the board. Aren’t the explorers supposed to show leverage to the underlying resource prices to which they seek?

History demonstrates typical long term leverage with exploration stocks. If gold goes up 20% you can reasonably expect the gold shares to perform at a multiple of that figure. At the present times the “juniors” aren’t even keeping up with rising commodity prices.

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The ongoing global credit crunch is a primary reason for this disparity. The appetite for speculation has waned. Global players have sold off winning positions in order to create liquidity. Some suggest that hedge funds may be shorting the explorers. Whatever the reasons are, the anomaly won’t persist indefinitely.

Either commodity prices must fall or junior miners must rise and close the gap. I don’t see commodity prices falling significantly from present levels. They stand as protection against currency debasement which happens to be a growth industry these days. The US dollar remains at the epicenter.

Opportunities abound. Read on to learn Russell’s favorite speculative Canadian mining stock.

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