GDXJ re-balancing pummels these 5 gold developers

The?(or GDXJ) is an ETF administered by Van Eck?and created to replicate the Global Junior Gold Miners Index which is a basket of small-cap gold exploration, development and production companies.? The GDXJ tries to maintain an average market cap of its holdings above $150 million.

According to recent filings, the ETF’s largest holdings are Centamin, IAMGOLD, Hecla and AuRico, but included in the 69 total equity?positions?are?exploration names such as Bear Creek Mining and Focus Minerals.

Needless to say, the ETF which mirrors the junior resource markets,?hasn’t performed well.

Year-to-date, it is down 18.18% but in the past 3 months the ETF is down over 40%.

Given the performance of the underlying equities, the pre-revenue, development stories that have become less and less liquid were sold in favor of more liquid, higher market capitalization names such as IAMGOLD, AuRico and Alamos.

As a result, some of these development?companies have been crushed by this relentless selling.

Asanko, Premier Gold, Torex, Rubicon and?Midway were among them.? Shares in those companies are down 23%, 25%, 22%, 17% and 15%, respectively over the past 30 days.

Last Friday saw huge volume traded in these names as well.

Asanko traded 28 million shares on Friday alone. The average daily volume traded over the past 3 months in Asanko is just?156,500 shares (the other names were similar).

These companies have all outperformed the GDXJ year-to-date.

So perhaps the decision to cut these outperforming names wasn’t the best call afterall?

Regardless, these teams have significantly de-risked their projects.? Below is a summary of the milestones achieved this year:

Overall, the recent selloff in these names should be taken in context.? All of the above teams are delivering on their promises, meeting or exceeding expectations, de-risking their projects and moving towards cash flow.

An unrelated index re-balancing sale of these companies’ shares provide an opportunity for us as resource speculators.? This is one of those?times where I, as a speculator, finding myself questioning my investment thesis.? Am I missing something?? Does the market know something I don’t?

In this case, I believe the selloff in the names is unrelated to the specific companies themselves or even the broader markets in general;?it’s just a portfolio manager with a heavy finger.

As a result, this re-balancing combined with the fact we are in the final days of tax-loss season provides an opportunity to gain exposure to high-quality gold development names

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