The Phaserl


Junior Resource Destruction & Three Traps to Avoid

from Outsider Club:

The junior mining sector has been decimated.

The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) — which holds companies as small as $10 million — has lost over 40% of its value in the past year. It’s lost 87% of its market capitalization over the past five years.


And some have met even more dreadful fates.

Global X launched a junior mining fund in September 2012 with the clever ticker JUNR. But you won’t find that fund exchange-traded anymore. The New York-based ETF sponsor decided to shut the fund down less than three years later.


Back in 2012 when JUNR debuted, CEO of Global X Bruno del Ama said his firm saw “value in junior miners at current valuations.” Little did he — or many others, including myself — know metals prices had already peaked. Four of that fund’s original top ten holdings are now bankrupt, circling it, or otherwise defunct.

We now know late 2011 and early 2012 was the top of the commodity cycle. It was not a buying time, though many of us — again, myself included — bought.

Four years later, four years wiser… what have we learned?

The High-Price Trap

We learned the hard way that past is not prologue.

Basing your gold mine’s economics on a price of $1,500 when gold had never been at that price before was an obvious peak-cycle mistake. We now know better.

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