Junior Explorer/GDX Ratio Still At Historical Extremes...Will Explorers Be Rocketing Higher Next?

I've been banging the table for the last 6 months about remaining optimistic during bear markets, and becoming incrementally more excited about a particular investment class as the markets appear bleaker. Since the beginning of September mid-tier and major gold mining companies have rocketed higher. At this time they are no longer at "catastrophic" level pricing as they were just 30+ days ago.

However, the junior resource exploration market still offers an entry at disaster level pricing. The ratio of GDX to many junior exploration plays is varying between 500-800 to 1, while in the previous 3 years, the average was about 100-200 to 1. In my opinion, this moment may be a twilight, the slow and precise tipping-point moment in which the explorers edge up ever so slightly---right before a historic boom. What I mean by boom, is many of these companies moving up in price by 200%-400% in a matter of days, weeks and months. We saw this type of action occur following the 2008-2009 crash, and we will see it again.

Here is a ratio chart of one of my favorite junior explorers. A snap-back reversion to the mean prior to this summer, equates to 150%+ move.

Many analysts comment that risk capital needs to first move into the upper echelons of the mining sector, before trickling down to the explorers. This is a given. However, the timing of this process cannot be fully predicted, and when it occurs, it happens in a flash. By concluding that we will "wait" for the money to come back in first is like saying, “I'll buy a life preserver when the ship starts sinking.”

We are still in a market environment in which risk is abhorred, and for retail investors, this is the perfect time to take positions in low-volume juniors, without driving share prices up. The advantage for most of us in this market (being non-institutional), is our size. As mice we can move in with agility, and calmly wait for the returning ground vibrations of "risk-on" elephants...who always come back to feed.

We are still in a market environment in which risk is abhorred, and for retail investors, this is the perfect time to take positions in low-volume juniors, without driving share prices up