what makes a select gold junior?

The full article posted on the Gold thread.


Gold bull still unfolding - $2,000/oz. by Year's End?

Entrepreneur turned bullion dealer Greg McCoach outlines the ‘new' criteria for junior miners, explains why he favours the juniors over more senior producers and advises a combination of both physical metal and stocks for investors to protect themselves in today's market. Interview with The Gold Report.

Author: The Gold Report
Posted: Saturday , 07 Mar 2009

VANCOUVER, BC, CANADA -


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You have to use ‘select' because so many of the juniors are going nowhere. It's only the select companies that are going to be protected or insulated from other market activity that's going in the wrong direction. So I'm looking for that moment our quality junior stocks start to move on their own accord.

TGR: Can you give us an overview of what you consider a select company? What is the criteria?

GM: The criteria is this. They have to have exceptional management. In other words, out of all the management teams that exist out there, there's probably only a small handful that really have the quality background and experience to do what they say they're going to do. Most of these other people are just managers or lawyers who don't have experience or are hoping to get involved with a hot sector. They're highly promotional, and most often are only looking out for themselves.

So you look for the people that have the right resumes, the ones who have worked for the majors for 10, 15, 20 years or more and have the experience (paid their dues so to speak), learned the business, understand what they're doing and what they are trying to accomplish. Do they have experience in doing this specific task such as find gold? Did they mine gold or silver before? If they were mining for uranium their whole career and they jump into gold, well, that doesn't sound too good to me.

So you have to have the experience and the knowledge base. That's key. The way we've been playing this market the last eight years is no longer as valid as it once was. We need to adjust to the new rules on how to play this game and win.

What the market is looking for is very specific. If you make a good gold discovery, it has to be in an existing mining camp. It has to be in an area where the development costs aren't very large. If you make a big gold discovery, and it's in an area that's out in the middle of nowhere, the development costs are going to be too high. No one's going to fund it; no one's going to finance a project like this with the new market environment. It doesn't matter how good the results are.

So you have to find these discoveries in good jurisdictions that have short permitting times that have existing infrastructure. If it doesn't have those things, forget about it. There are plenty of great discoveries that I know of. They're just in the wrong area. Some examples would be Romios Gold Resources Inc. (TSX.V:RG), Copper Fox Metals Inc. (TSX:CUU), who have tremendous discoveries but are unfortunately in the wrong area. It takes too much money to develop such a desolate area as we have seen with NovaGold Resources Inc. (TSX:NG) (AMEX:NG) in their effort to get the Galore Creek deposit in production. The cost overruns were so enormous, they had to shut the whole thing down. Well, the market's not interested in those kind of projects anymore. I choose to invest in areas that have what the market wants.

Look in the areas that have plenty of existing mines and infrastructure. This is where plenty of experienced mining people already live and juniors who can make a discovery will most likely be bought out by a major who is in the area.

Now certain jurisdictions are better than others. The political risk now is more intense than it was. Political risk is always a big factor, but the political risk now is just amazing, so you have to be very careful where you're willing to invest your money. For me, I'm getting to the point where there are only a few jurisdictions that I'm willing to look at. Certain parts of Canada where there's existing mining camps, certain parts in the United States, and Mexico which still looks very good. That's about it. Everything else is no longer as attractive as it once used to be.

We're also looking for higher-grade resources vs. lower grade. We're looking for low-cost development situations vs. high-cost development situations. We're looking for economic deposits that can be financed.

Here's another situation-within mining, the different kinds of discoveries. A large copper-gold porphyry system is known to house large amounts of gold and silver,; but, unfortunately, it's also known to have very high development costs. Who's going to finance that? I'm not as interested in those kinds of stories as I once was. You're better off looking for the higher grade- "epithermal"-smaller vein, higher grade, near-surface deposits that will have an easier time of actually going the whole distance and getting into production.



The above article is published by kind permission of The Gold report - www.theaureport.