With the recent sell-off in gold, many investors are shying away from junior mining companies and other penny stocks. This could be a great opportunity for the long term investor in gold junior mining companies to scoop up solid penny stocks for relatively cheap prices.
Gold prices move around all of the time. The underlying trend is still up, yet we will read and hear about price moves every day. Junior mining companies that are exploring for and producing gold are looking out over the next five to 10 years and even further out. This divergence between the short-term trading of gold, the commodity, and the long-term investing of gold junior mining companies can be seen as an advantage for a patient investor. This is because the gyrations allow for someone to enter gold junior mining companies when the short-term traders decide to jump out. Scaling into positions is always a good idea for all penny stocks and not just gold junior mining companies.
Claude Resources Inc. (AMEX/CGR) has several properties in Canada, including a mine currently producing gold. I do like to invest in gold junior mining companies with several properties, hopefully one of which produces some gold, to help finance their exploration costs. As in all gold junior mining companies, there are always risks associated with holes being drilled and coming up empty, so an investor must conduct thorough research before investing.
Claude Resources is estimating that it will produce 50,500 ounces of gold for the year 2012. Compared to 2011, this would be an increase of 13%. The problem with the stock appears to be a lack of faith in the company, since it has missed estimates by analysts. Since expectations are low, this could prove to be a low ?hurdle? for the company to jump over and, if it succeeds, this would result in the stock price moving up. The firm has also spent money on better equipment and appears to have things on track to really surprise to the upside.
Chart courtesy of www.StockCharts.com
Sometimes, when investing not only in gold junior mining companies but also all penny stocks, if the expectations for a company?s results get so low and management finally does turn things around, this can be a great entry point for an investor. Catching this turn in sentiment is never easy for penny stocks, but if that is the case in this company, then this might be one of the more interesting gold junior mining companies and perhaps worth further research.
Claude Resources trades at a forward price-earnings ratio of 5.84, at a price-to-book level of just 1.0, and is growing revenue. With $35.0 million in cash, which ends up being $0.22 per share out of a share price of $1.11, this firm shows some solid fundamentals. Not only is this firm actually producing gold, but it?s also continuing to explore its properties. If any part of the area under exploration hits higher levels of gold, then this current price will be seen as a relative bargain.
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