Do you hold a basket of small explorers?
My condolences if you do!
Over the last several years, it’s been a tough slog at the ‘non-incoming’ producing end of the junior mining market.
But there are some positive vibrations emerging that I want to point you towards today.
And it starts with this: liquidity.
Now, the term ‘liquidity’ gets bandied about a lot in financial circles.
I suspect most investors don’t have any real, concrete idea of what it actually means.
It’s taken me a long time to grasp the true meaning.
But it’s essential —a vital element that drives the value of your assets.
Without sufficient liquidity, investments stagnate, wither and decline in value.
It’s the lifeblood driving portfolio returns. When liquidity vanishes, asset valuations tumble.
So, what the heck does liquidity really mean?
Well, let’s look at a textbook definition, like this:
Liquidity refers to the ease with which an asset can be purchased or sold without causing a drastic change in its price.
In a liquid market, one can sell quickly without accepting a significantly lower price. In a relatively illiquid market, an asset must be discounted to sell quickly.
But again, how does that relate to junior mining stocks?
Under normal market conditions, exploration stocks tend to trade in an environment of ‘tight’ liquidity.
Where the pool of investor capital is limited.
Holding stocks at these times means any attempt to sell them back INTO the market usually results in a loss. Buyers are scarce.
But understand this: Events move liquidity.
While a sector, like the exploration market, can remain starved of liquidity longer than anyone can imagine, certain events can drive capital back into specific stocks.
The most obvious one here is a strong drill hit, which generates news flow.
Investors get interested, buyers enter the market, and sellers finally have a market with a pool of willing buyers.
In other words, liquidity comes back!
However, these events are usually temporary.
And they’re company-specific. A positive drill hit does nothing for the broader exploration market.
To do that requires a significant shift—a giant sector-defining swing—something that will alter the entire landscape for the junior mining sector.
The last time that happened was in the early 2000s. Yes, it’s been a long time between drinks for exploration investors!
The Chinese infrastructure boom was this sector-defining ‘liquidity’ event.
A powerful force, flipping investors’ mindsets back into junior explorers after a decade or so of abandonment.
Events like this generate mass investor excitement and a tidal wave of speculative capital… The liquidity furnishing higher stock prices.
The forces driving commodity investments
So, while it’s essential to know WHICH stocks to invest in the junior mining sector, it’s equally important to know WHEN to invest in these companies.
And on that note, last week, I finished putting together a report that distils the events that I believe will drive liquidity back into the junior mining sector.
These events can be likened to FORCES…
Elements that will drive liquidity back into junior mining stocks.
And I don’t see just one force on the horizon, like the early 2000s commodity boom, but FOUR!
All set to arrive at once.
To find out what they are, click here.
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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