The real value of gold juniors with gold resources has been increasing while the ASX value/market capitalisation of most of these juniors has been decreasing. So don't expect the market to accurately value these gold companies when they become the flavour of the month.
We will reach a time where they are just as overvalued in comparison to the price of gold as they are now undervalued.
Then there will be unbridled optimism, the complete opposite of all the negativity we see now. What negativity? Well here are some common themes.
1. It's not much point a gold junior just having gold resources in the ground because it is not producing and making a profit.
2. A gold junior won't rise in value because it proves up more ounces in the ground. This isn't making any profits. All it is doing is burning cash.
3. If a junior isn't a producer it won't be able to get the money to develop a mine.
4. If it is lucky enough to get the money then shareholders will be diluted away so they won't benefit.
5. If it starts mining it will go bust anyway.
6. Rises in the US dollar price of gold will disappear in higher operating costs and the higher Aussie dollar.
7. It's just too risky putting money in a gold junior. The only gold stocks you should buy are ASX 200 companies that are producers.
8. We are in a new age - the Age of Risk aversion. This means no matter how high the gold price goes no one will really be interested in gold juniors proving up resources because they are risky and not making a profit.
Oh, by the way, all this negativity is of course refuted by FMG with a market cap well in excess of $20 billion without making one cent from production. Ahh .. but that's iron ore. There's the big difference! lol rofl
