Thinning Of The Herd,
The Gold Herd, That Is

By Charles Kubach, Mine-Engineer.Com
23 Nov., 2012

Well, with all the talk about capital becoming scarce for the numerous junior gold mining companies going around, I thought it timely to put in my two cents worth. Since the early 2002 and on, there has been a explosion in gold exploration, with the rise in the price of gold. Since the global economic recession of 2007, the number exponentially multiplied, with prices rising to $2000 a ounce then settling back to the $1,700's per ounce. Large funds were a boon to juniors, but they have long departed investing in these companies, leaving a shortage of available capital for their future operation.

For a while, it was a wild ride up the steep slope, but it is a rule, that the steeper the slope upwards, the steeper the downward slope will be, if there is no real reason for the value of the company's stock price (reality). It appears the time is here for the thinning of the junior gold mining companies, since according to documents filed, they at best, have capital for no more than a year's operation, currently. Reality means that those companies without actual economic properties (reserves of gold based on drilling/assays), they will find it nearly impossible to obtain capital to continue when their current cash runs out. The handwriting is on the wall, and it is bleak for these companies.

It is estimated that this will apply to 70% to 75% of all junior gold mining companies. If that many go away that is not a thinning, but a gutting of the gold exploration, but reality always wins. If you look and never find anything of value, you can not expect investors to keep funding your efforts, just ask the plethora of dot coms from 2000.

For those that do hold economic reserves, the future is bright, as they will either place them into production, or sell them to major mining companies which will place them into production, and stock holders and investors will be rewarded. Personally, I have come across many of these companies, where I scratch my head and say "who the #### would give these people money to explore for gold?" It was obvious, to me, that this would be like setting the capital on fire, then, at least, one would have heat, and as it is they will have nothing but losses.

The moral of this story is reality always wins. You can not escape it, you must live within realistic boundaries eventually and the fantasy world of those saying "I just know there is gold in those rocks", without any evidence to back up the statement is pure fantasy. Fortunately, I currently do not have any junior gold stocks, but if I did, I would be examining them for reality and selling most of them for what I could get, before the capital hammer falls next year. Many governments could learn from this, but they never seem to do so, as they continue printing money and borrowing until they become Greece.

Ranking Country 2011 Output (Tons) 2010 Output (Tons) Percent World Production
1 China 380 341 13.6%
2 Australia 272 260 9.8%
3 USA (Nevada) 243 236 8.7%
4 South Africa 221 209 7.9%
5 Russia 205 197 7.4%
6 Peru 156 163 5.6%
7 Ghana 102 92 3.7%
8 Canada 101 91 3.6%
9 Indonesia 97 128 3.5%
10 Mexico 82 72 2.9%
Rest of the world 930 33.3%
Total world gold production 2789

"The Sign of an intelligent person is not the realization of all they know,
but rather the realization of all they do not know."
Charles Kubach 1979

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