Not only are the junior miners undervalued, according to Johnson and Denbow, but miners do disproportionately well in a gold bull market.

"The rule of thumb is a 1% move in gold prices equals a 2% to 3% move in mining stocks," Johnson explains.

So when gold prices rise by $1 an ounce, miners' profits can jump by $2 or $3. Here's why: Large and small gold miners operative massive mines with fixed costs like labor and fuel. Bullion dealer Kitco says it costs the average mine roughly $425 to extract an ounce of gold. That represents a $635-per-ounce profit if gold trades at current levels around $1,060 per ounce. If gold rises 10% to $1,170, a miner's profit rises to $745, up 17%.