One of the major developments in the global markets this year has been the recovery of precious metals prices and, along with them, the fate of the gold mining sector.
This bounce-back has been felt more broadly across the entire commodities sphere, in fact. After being mired in a bear market for the past four years, it appears that commodities are finally poised to break out.
New Bull Market?
As a matter of fact, commodities have generally outperformed both stocks and the U.S. dollar since about the beginning of March, according to the Bloomberg Commodity Index. This commodities index has now risen 20% above its January low. (The emergence of a "bull market" is generally taken as a 20% increase above a market's previous 52-week low.)
This is the strongest signal that the bear market in commodities is over that we've seen over the past four years. However, some investors would be right to point out that an apparent turnaround for commodities has occasionally popped up over that time, but never for any sustained duration. Moreover, the Bloomberg Commodities Index remains 50% below its 2011 levels.
The signs may be particularly convincing in the mining sector, though. According to Mineweb, "The Bloomberg World Mining Index is up 23% after a three-year collapse, with BHP Billiton, the world’s biggest mining company, up 7.6%."
Millions for Mali Gold Mine
One trend that is to be expected in a bull market is fresh investment. Accordingly, a major gold mining project in Mali is seeing a new infusion of cash. Hummingbird Resources (HUM) has raised $67 million to further develop the Yanfolia gold project. This gives a strong lift to the prospect that the mine will begin producing gold as soon as 2017. Hummingbird estimates 132,000 ounces in gold output in the initial year of production.
This may be just one example of greater expansion and exploration of Mali's gold mining industry as precious metal prices become more attractive. The country is also recovering from terror attacks that threatened the gold mining sector directly:
"Mining in Mali suffered a crisis of confidence last November with a terrorist attack at a hotel that left 14 dead. Two executives from Vancouver-based B2Gold Corp (TSX:BTO, NYSE:BTG) were staying at the Radisson Blu hotel in the Mali capital of Bamako when gunmen stormed the premises. The men were rescued and brought to safety by Malian special forces who entered the hotel and began kicking down doors looking for guests. About 170 hostages were taken by the militants and 19 were killed in a mass shooting; jihadist group Al-Mourabitoun has claimed responsibility in co-operation with al-Qaida."
What About the Juniors?
Another trend that has impacted the industry has been the meteoric rise of a variety of penny-stock junior gold miners. This raises an interesting question for investors: How do you tell the difference between the winners and the flops in the junior mining space?
Analysis by the sharp minds at DollarCollapse.com point out a great rule-of-thumb: stick with who you know! While there are no guarantees, the companies who have proven management teams with a track record of success are by far the safest bets when it comes to high-risk, high-reward junior miners.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.