The NedSec Junior Mining & Exploration Index (NSJME), an index tracking junior mining shares listed on the Johannesburg Stock Exchange (JSE), has showed year-to-date growth of 19.7%, compared to the LSE's FTSE All-Share Index performance of -8.4%, or 5.7% in rand terms, and the JSE All Share Index's performance of 8.6% in the same period.
Even so, the Junior Mining Index is experiencing more modest growth compared to its outstanding performance of 111.5% in 2006. However, the index is competing well against the Resi20 Index, comprising the JSE's 20 largest resources stocks, that has grown 33% in the year to date, but includes companies exposed to the oil price.
In 2007, the Junior Mining Index achieved growth of 26.8%.
Nedbank quantative analyst Nerina Visser said today the index's top performers in the year to date included coal companies Wescoal (JSE:WSL) at 249%, Coal of Africa (JSE:CZA) at 181%, Hwange Colliery (JSE:HWA) at 169% and Miranda Mineral Holdings (JSE:MMH) at 146% growth.
Platinum companies, including big names among the juniors such as Northam Platinum (JSE:NHM), and Aquarius Platinum (JSE:AQP) also fared well at respectively 83% and 66.5%, while developer Wesizwe Platinum (JSE:WEZ) has lost about 22% this year.
Another big player in the junior sector exposed to platinum and gold, Mvelaphanda Resources (JSE:MVL), has also showed a strong performance of 60% in the year to date, with copper play Palabora Mining (JSE:PAM) following at 53%.
However, some junior gold plays on the JSE, such as Pamodzi Gold (JSE:PZG), and Simmer and Jack Mines (JSE:SIM) have seen a drop in share prices. Pamodzi Gold has seen a gradual slide of 54% in its share price, while Simmers is down 13%.
Visser said the Junior Mining index's phenomenal performance in 2006 came on the back of tremendous growth in various commodity prices such as copper and platinum.
The index's current performance was a reflection of commodity prices prevailing at these high levels but showing more volatility. This was evident in the index's sometimes volatile movements from day to day.
The analyst said junior companies were typically single commodity companies that were more exposed to volatility in a single underlying commodity compared to diversified miners that spread its risk over a number of commodities and markets.
Junior miners did presented an investment opportunity to investors who believed strongly in the fundamentals of a particular commodity, but didn't offer the lower risk of diversification in markets and commodities.
Visser said the Junior Mining Index's outperformance of the LSE and JSE's All Share Indexes was an indication that the index had offered better returns compared to the overall market and banking and financial stocks dominating the LSE's All-Share Index.
Junior mining companies could give investors chasing high returns the results they sought at times, but investors had to be aware that high risk was involved and that these stocks also went through bad times.