Why Short-Term Risks in Junior Miners Could Lead to Long-Term Profits137 views 2013-07-25 00:27 Tags: Junior
The fall in the price of gold bullionhas certainly hit investors, but there is even greater pain among junior mining stocks.
Obviously, junior mining stocks depend on gold prices to generate revenues and earnings. However, unlike larger, more integrated companies, junior mining stocks might not have any cash flow, thus they depend on external financing for the development of mines and exploration work.
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Because gold prices have declined significantly, many junior mining stocks are suffering as the availability of financing is drying up.
A stark example of what can happen to junior mining stocks in the gold bullion sector is the recent events regarding Colossus Minerals Inc.(OTC/COLUF). This company was trading at $10.00 a few years ago, and just closed a $28.75-million round of financing a month ago at a share price of $1.60.
Read More: Why Short-Term Risks in Junior Miners Could Lead to Long-Term Profits