Newsletter Watch: Mining for value in "juniors"

There are numerous risks involved in investing in junior mining companies. They are dependent on the price of metals and investor sentiment toward metals. They may be highly leveraged and each individual miner firm has operating risk, management risk, financial risk and of course, the development risk of finding the metals for which they are mining.

On the other hand, many of these same factors can result in upside opportunity; there are junior mining stocks that do indeed hit "pay dirt."

Given the risks and challenges, it is essential to rely on advisors with proven, long-standing records of expertise in the sector. Such is the case with the three advisors we turn to today: Adrian Day, Brien Lundin and Doug Casey.

"When building a portfolio of junior mining stocks, stick with the best—not just the cheapest," says Adrian Day, in his industry-leading The Global Analyst.

Though he is cautious near term, the money manager and advisor forecasts that gold is still only part way through its current bull move and still likely has years to run.

Day says that if he were to build a gold and resource portfolio today, from scratch, his favorites would be Vista Gold Corp. (AMEX: VGZ), Virginia Mines Inc. (TSE: VGQ) and Allied Nevada Gold Corp. (AMEX: ANV).

"Vista Gold, which has a market cap of $194 million, owns about 0.4 oz of gold per share in the ground, making it cheap on an asset basis. The company has a strong balance sheet and is moving to monetize its assets, including moving forward on production from one advanced property,” Day says. “The business model, with lots of known but high-cost ounces in the ground, gives it good leverage to the gold prices.”

 Day says he likes Virginia Mines, which he calls “a successful prospect generator” in Quebec, because the company has cash and a royalty on a gold property it sold last year, and on an asset basis, remains a good value. He says the small cap has over a dozen active projects, with four current drill programs, mostly in joint-venture with others who spend the money to earn into Virginia's projects.

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