Good earnings from the HUI leaders is exactly what I am hoping to see to kick start the next major significant move in gold stocks and most particularly junior gold stocks. I have been calling for and waiting for this time for months as the gold stocks demonstrate they are value stories once again based on their earnings. This will bring a whole new mountain of capital into these stories from major mutual funds around the world as the hedge funds exit moving their stock valuations to new highs thereby making their shares as good as cash, maybe better.
This will place the majors into a position they have not been in for years where their shares are capital to make deals with and make deals they will as M&A activity in this space heats up big time looking for the best juniors with the biggest resources. I also expect the sovereign wealth funds will compete with these companies in the rush to get the biggest and best assets, especially those in friendly places like Mexico. This will finally place Mexico front and centre.
ECU is now on a very short list of the best and biggest resource development stories on the planet and this next phase which will be probably ongoing for the next 18-24 months and will shock people at how large the moves are and how long it continues with minor corrections along the way. So the biggest and highest potential resource companies are the key targets expecially those in safe countries with good laws.
I also expect consolidation in the junior producer sector where the resources are yet limited and have less growth potential, especially Mexican stories of which there are way too many and mostly smallish in potential for a major company to even talk too. This sector will perform well but not be near as interesting as those with the big deposits. I keep waiting for the great consolidator to appear who will create a large company from many small companies. Little leadership to date has appeared in this segment.
