possibly further evidence of the problem in the resource sector in this article.

If junior golds are an indicator of market risk or state of the smaller stocks – It isn’t pretty !! : Stockhouse Ticker Trax

Update to Our Monthly Gold Valuation Tables shows valuations moving back to December lows.

Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.

This week’s discussion topic

I. Update to Our Junior Gold Stock Valuation Table: Valuations on a per ounce basis fall from February recovery and move towards December lows.

Note: If you live in the Vancouver region, The World Moneyshow (moneyshow.com) will be hosting their annual gathering of investors and traders at the Vancouver Convention Centre March 27th to 29th. They have dozens of free workshops, speakers and events.

December Junior Golds Avg $48/oz, February $59/oz, March $50/oz

I. Junior Gold Valuation Table – March Update

Our basket of junior gold exploration stocks is a very good barometer for the junior resource industry in general and in particular, the health of the microcap and penny stocks.

As an equity analyst and writer for Ticker Trax and also as publisher and analyst for MicroCap.com, it is in my best interest to talk about how wonderful the small stocks have been and how the outlook for 2012 is tremendous. Unfortunately that is not going to happen.

In 2009 and 2010 the small stocks generated tremendous gains. In fact, I often joke about a monkey being able to make money during that period. I literally picked over 100 stocks during that period and lost money on approximately 10% while the huge majority gained on average over 100%.

Then came 2011 in which the monkeys all starved to death ! We still did alright and overall average was in the range of 40% but that was with fewer picks and a dozen losses that averaged about 25%. Even when I have been doing this for almost 30 years, these small stocks can be extremely frustrating and very difficult to read. The gains can be tremendous, but you must also carefully diversify and manage risk. This past year, that has been a challenge.

Case in Point – The Junior Gold Stocks

As I mentioned back in January when we first put this gold table together, many brokers, promoters, investors and newsletter writers were saying throughout 2011 that junior gold stocks should be valued at $100 per ounce or better. I had been writing since spring 2011 that I was seeing nothing (on average) that was close. So in December with Stockhouse we decided to prove the point and put these tables together and update them monthly.

The valuations on any mineral or metals exploration project are highly variable and dependent upon many factors like capital and operating costs, metallurgy, geographic risk, grade, etc. Trying to put all those factors into a table is very time consuming without a full time analyst committed to it.

So these tables are designed to serve a purpose that gives us a junior gold stock valuation benchmark, guidance on potential investment opportunities, a gauge for the state of the microcap (penny stocks), and a barometer for overall market risk.

The reason the risk factor, is because I find that when the price of gold is high and the junior gold stocks are doing well, everyone is optimistic and the positive moods lead to a healthy environment for investing in penny stocks overall.

Right now however, we are seeing high/stable gold prices but junior gold stocks that are moving back to the painfully low valuations hit in early December. Not only has the average dropped from February ($59 per ounce) when we were starting to see a nice recovery, but we are seeing many companies trading below $20 or $30 per ounce – and some near $6.

Some valuations have fallen dramatically (on a per ounce basis) from February. Riverstone Resources Inc. (TSX: V.RVS, Stock Forum) to $40 from $19, Keegan Resources Inc. (TSX: T.KGN, Stock Forum) $49 to $20, Carpathian Gold Inc. (TSX: T.CPN, Stock Forum) $30 to $21, Volta Resources Inc. (TSX: T.VTR, Stock Forum) $51 to $28 – just to name a few.

Volta (VTR.T $1.08) was very disappointing for us because I started coverage of that company near $0.90 in December and watched it run to $1.70 by mid February on strong drill results. Then it started to fall and even with a significant resource update this week, the stock has now dropped to $1.08 on strong and consistent selling. This was another one of those companies that exhibited at PDAC in Toronto and has seen nothing but selling ever since.

Volta is a classic example of the state of this market for small companies right now – and why you have to be very careful when you have people (often promoters) telling you a gold project is worth xx dollars. Volta has approx. $50 million in net cash and 5 million ounces in the ground (West Africa) that currently carries a valuation of only $28 per ounce.

When we are seeing valuations like this (and continual selling even near the low), there is something seriously wrong with the investment environment. What that is, I am not sure at the moment. I do know that we could all use a sustainable rally in “something” to bring back the speculators and inject some life into these beaten down juniors.

Standardized Monthly Notes for our Gold Tables

We have sorted the same table four ways so you can determine which format is the most useful.

NOTE: Due to limited space for website presentation, we are not able to display various additional notes for many of the companies. This may include additional copper or silver resources that were not taken into consideration for the valuation. Only resources that were specifically reported in a 43-101 report were included. Many of these companies own various other projects or assets that may add additional value. Almost all companies host a Powerpoint presentation on their website and this is a valuable tool for doing further due diligence.

(Please click on the individual table to see bigger size)

Comparative Chart of Junior Gold Companies - Sorted by EV/Risked Reserves

Comparative Chart of Junior Gold Companies - Sorted by Net Debt

Comparative Chart of Junior Gold Companies - Sorted by Total Reserves

Comparative Chart of Junior Gold Companies - Sorted by Name

IMPORTANT NOTE: Our Ticker Trax Comparative Gold Analysis is an educational tool. If you are not a professional money manager we strongly suggest working with a qualified investment advisor prior to making any investment decisions based upon these tables. Once a month we will update this analysis and publish it on Friday afternoon with any relevant notes.

Research & Analysis by Adam Deadlock [*]

[*] Adam Deadlock is a 2012 graduating finance student from the University of Calgary, Haskayne School of Business. Adam does part time research and analysis for various Ticker Trax projects and also for MicroCap.com. He is part of a small group of Haskayne students involved in the Calgary Portfolio Management Trust (CPMT) initiative.

GOLD TABLE REFERENCE NOTES:

Measured Mineral Resource: is that part of a resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of a deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

Indicated Mineral Resource: is very similar to the Measured classification but the resource can be estimated with a level of confidence “sufficient” to evaluate economic viability of the deposit. This classification is much stronger than Inferred but still makes a significant number of assumptions. Most junior exploration companies in Canada report Measured & Indicated (M&I) in the same category.

Inferred Mineral Resource: is that part of a resource for which quantity and grade or quality can only be estimated on the basis of geological evidence that involves limited sampling and reasonable assumptions. The estimate is based on limited information gathered from locations such as outcrops, trenches, pits, workings and a very limited number of drill holes. The inferred category is similar to saying “we have a reasonable expectation the minerals are there but have yet to prove it through sufficient drilling”. Moving a resource from Inferred to M&I can be time consuming and expensive.

Original Gold Valuation Tables and Introduction - December 2011

http://www.stockhouse.com/Columnists/2011/Dec/16/Shockingly-Low-Gold-Ounce-Valuations-on-48-TSX