The Key to Junior Mining Investing

The Gold Report

While the junior mining sector has not seen the benefits of higher gold prices, there is reason for optimism, says Vikas Ranjan, managing director and principal of Ubika Research. In this Gold Report interview, Ranjan lays out his case for why juniors with quality projects should bump up and names some companies poised to benefit.

The Gold Report: When you spoke with us last year, you talked about Europe’s financial problems being a policy issue. Are they any closer to a solution to the debt crisis there and is the situation in the U.S. parallel to that?

Vikas Ranjan: I think there’s been progress made toward solving the debt crisis in Europe and also in the U.S., which is a different ball game. When I said Europe is more like a policy problem, I meant that it’s not a problem that just came up one fine day. A monetary union without any proper fiscal union creates a situation where weaker countries can hide under a stronger currency and run big deficits, and at the same time don’t have the flexibility of using cheaper currency when they get into trouble. That has been the case with countries like Greece, Italy, Portugal and Ireland.

Now there’s a realization in Europe that if they want to save the euro, they also have to have some sort of fiscal union with a sovereign type of debt facility, which they are working toward. Even countries like Greece have done better than what some people expected and are trying to resolve the crisis. The European Central Bank (ECB) has clearly stated that it would do whatever is required to keep the euro in place. The market is giving some credence to that, with bond yields on stronger countries such as Germany creeping up, whereas weaker countries are seeing a fall in those yields. We are probably moving toward some sort of solution, which is going to take some time.

Since the U.S. election is over, we will see more systematic talk about reducing the deficit and the debt. We may see some differences in approaches, and some give-and-take, but ultimately a solution will have to be found.

Read the full interview . . .