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As gold continues to outperform many sectors and looks to close 2010 near the $1400 range, the projection for $2000/oz does not seem crazy for next year and beyond. Whether gold corrects or continues its bullish ways, finding junior gold companies can be a very smart long term investment, although time is critical when looking at this sector and there are important factors to consider.
As seen in the chart above the initial run a junior development company makes is based on turning speculation about reserves in to actual drilling results. As these results are better known the stock reacts accordingly. At some point one of two things will happen. Either the company will go find the necessary capital to go into production, which is seen on the chart showing the long road followed by price decline as much of the excitement fades. The other outcome is they will simply get bought out by a much larger company. Those that stay the course over the years and actually put their mine into production eventually are rewarded, but it is a long road with many potential road blocks. A good example of that would be the Kensington mine that Coeur d’Alene Mines took years getting permitted and is finally in production.
One company who is following this chart to the letter is Canaco Resources Inc. (CAN.V). Canaco phenomenal run from roughly .50/share to a recent high over $6 has treated investors with faith handsomely. Relatively unknown a year ago, they have spent the last year drilling in the Company’s Magambazi gold discovery located in the Handeni region of the United Republic of Tanzania. … [visit site to read more]
