Junior mining stocks could offer some of the strongest upside in the next phase of the commodities rally, according to Commodity Discovery Fund founder Willem Middelkoop, who says the sector is only beginning to emerge from a prolonged period of depressed valuations.
Middelkoop said senior gold producers have already enjoyed a powerful run, while exploration stocks remain well below valuations reached during the previous mining cycle. He believes that leaves considerably more room for juniors to catch up if metal prices remain elevated.
“The most leveraged, the highest torque you will find in the more junior names,” Middelkoop said.
His comments come after a strong August for mining equities, with the TSX metals and mining sector gaining more than 27% during the month. Gold, meanwhile, ended August up nearly 10% despite retreating to around $4,430 an ounce after Federal Reserve Chair Kevin Warsh revived expectations of another U.S. rate hike.
Middelkoop remains bullish despite the pullback. He told Top of Mine that his fund had raised cash ahead of the recent correction and deployed $2 million into two private placements on the day of the interview. He also said he had personally increased his silver holdings over the past two weeks, calling the metal “a steal” and maintaining a long-term price target of $500 an ounce.
