The mining industry saw its darkest days in the late 90s and at the beginning of the new

millennium. If you told anyone back then that come 2008 we would be looking at a gold price of

$900-plus, they would have screamed “we’re going to be rich” -after they woke up from fainting,

that is. Yes, mining and exploration shares have grown nicely higher since then, but given the

tremendous rise in metal prices themselves, most shares have under-performed -especially further

down the food chain into pure exploration shares. It’s been quite frustrating, especially among

individual speculators, and I for one have envisioned bull markets for juniors that remain mostly

fantasy.

Hindsight being 20/20, why has this happened? There are several reasons, starting

with the fact that the way the financial industry does business, especially in the United States, has

changed dramatically. Back in the 90s, numerous stockbrokers built their business doing commission-driven stock selection.

But, between the metal prices going in the toilet, among other factors, mining share stockbrokers became dinosaurs. This

has removed one of the previous buying forces.

Secondly, regulators and the compliance departments of most brokerage houses in the U.S. made it all but impossible

for a broker to solicit trades on a stock that doesn’t trade on the NYSE, Amex or NASDAQ – not including the OTC BB.

And if a broker/advisor wants a client to buy a penny stock, many times they have to sign a non-solicitation letter. The client

says, “You want me to buy a stock but say you didn’t tell me to buy it?” Thus, American buying of junior resource stocks

remains almost nil.

Regional differences have had an impact as well. While natural resources are second nature to Canadians, most

Americans have zero knowledge about mining and exploration, and it seems like the U.S. brokerage industry and financial

media like to keep it that way.

Then there’s the state of the mining and exploration industry, which has seen costs skyrocket, great difficulties in

securing qualified labor and a world that’s far more hostile towards mining and exploration than ever before. For exploration

companies, getting timely drill results is very difficult as labs are literally overrun with work.

All of these factors have played a role, but perhaps the single biggest negative impact for shares, ironically, is one

of the biggest bullish factors for gold itself: Exchange Traded Funds (ETFs). Before ETFs, institutional and individual

investors could either buy bullion itself or mining shares as a proxy for metals. Now, they can have direct exposure to

metals prices through ETFs. While this has helped to push metals prices up, it has removed some of the previous buying

pressure for mining shares.

Peter Grandich - 732-642-3992

www.Grandich.com

So the big questions seem to be: Do shares finally catch up to metals performance? Or do metals prices come

down to shares? Or will they meet somewhere in the middle? Since this is the third year in a row that I’m predicting a great

bull run for the shares I may not be the best person to listen to – though the third time could be the charm! I do believe,

however, there are tremendous values on individual bases.