When the dot-coms crashed in 2000, we were told there would never be another bubble like it.

Nope, investors had been burned big time and wouldn’t stand for another crash and burn. Dot-con and Henry Blodget were dead and gone. Stocks would never fly on fantasy again. Reality – and old-fashioned earnings – were back in vogue.

Well, guess what?

We’re sitting on a junior mining stock mini-bubble that bears a striking resemblance to the tech bubble.

The difference with this bubble is that it has not been created amid great fanfare and it has an identity crisis, lacking a marquee play like Nortel Networks. But once it starts to garner headlines, watch out for a potential avalanche that could be every bit as painful as the tech crash of March 2000.

This time, the rockets are not household names but obscure junior miners with names such as Westchester Resources and Northern Lion Gold and Pargas Enterprises and Weda Bay. Like the tech boom of late 1999 and early 2000, the junior mining boom features companies with laughable capital, no production, no earnings and no revenue.

In the height of dot-com fever, all it took to light a fire under a company’s shares were the magic words in a press release such as wireless or e-commerce or simply a dot-com handle.

These days, all it takes is news about a hole in the ground where someone found a nugget 397 years ago and you’ve got yourself a double play. If the hole happens to be next to a Chinese rice paddy, maybe you’ve got a five-bagger or 10-bagger in a matter of weeks.

Year to date, penny mining plays are the biggest gainers on the TSX and TSX Venture exchanges. Several of them boast 10-baggers and now it’s not just precious metals that speculators are frothing over. Base-metals plays, particularly those in copper and nickel, have recently crashed the gold bugs’ exclusive party.

Westchester Resources (WSR.H-TSXV), which rose from the ashes of Nucanolan Resources, is the hottest stock in Canada this year, up 7,200 per cent year to date and we can’t even find any news.

Northern Lion Gold (NL-TSX) is up 5,866 per cent year to date on its gold/copper prospects in China.

Calgary-based Pargas Enterprises (PGA.H-TSXV) is up 3,233 per cent year to date on its prospects in China and has just announced a $7.5-million private placement financing.

These are all fledgling early-stage exploration companies, probably years away from production.

Yet, as the juniors rocket, large-cap gold producers with real earnings have been under-performing with modest gains. Newmont Mining (NMC-TSX), the world’s largest gold producer, is up only 40 per cent year to date.

Canada’s biggest but most despised producer, Barrick Gold (ABX-TSX), punished for its history of hedging that hasn’t allowed it to take advantage of a rising gold price, is up a paltry 20 per cent.

The juniors, fuelled by gold’s vault over $400 US per ounce, have been running a fever for about four months. Four years ago, the techs also made their sharp spike in a four-month span.

Wi-LAN (WIN-TSX) spiked from $10 to $90 in four months with a chart pattern that is a carbon copy to some of the junior mining stocks. It took Wi-LAN a month to plunge from $90 to $30.

When the band stops playing and the party ends for the mining juniors, there will be a massive stampede to the exits. Better have your exit plan, be it stop-loss orders or whatever, in place before the lights go out.

* PENNIES FROM HEAVEN: The Dirty Dozen Canadian Penny Stock Index, Financial Edge’s tribute to the unloved microcaps, continues to outperform the TSX index with a 36-per-cent return since its launch nine months ago. The TSX is up 21.2 per cent in the same period.

As we do our quarterly housecleaning, Nelson Resources (NLG-TSXV), a new entry three months ago that rose 99 per cent, gets the heave-ho for vaulting the $1 plateau – the seventh of our penny stocks to hit $1.

We’re adding Caledonian Mining (CAL-TSX) at 40 cents. Rounding out the list are Versatile Mobile Systems (VMS-TSXV), +250%; X-Cal Resources (XCL-TSX), +160.6%; Maxim Power (MXG-TSXV), +60%; Excellen Resources (EXN-TSXV), +31.4%; Imaging Dynamics (IDL-TSXV), +31.3%; Twin Mining (TWG-TSX), +21.2%; Option Snowboards (OPN-TSXV), +11.1%; DataWave (DTV-TSXV), -6.7%; Mainframe Entertainment (MFE-TSX), -21.4%; Thistle Mining (THT-TSX), -53.3%; and International Utility Structures (IUS-TSX), -70%.

* SAGE WORDS: “I believe that true success in life is based on results, not theories and concepts. Action is a lot more important than words.”

– Les Hewitt, Calgary business coach, Achievers Canada



HOT ALBERTA STOCK: HEMOSOL
HML-TSX $2.02
Up $1.22 (+152.5%) on 1,908,800 shares (for week ending Dec. 5).
As we’ve said here before time and time again, yes, you can buy on news. Hemosol stock gapped up only marginally on news and gave a final call to investors, dipping before the train left the stations. The shares peaked at $2.28 early on the second day after the news, making it better than a double post-news. The Mississauga blood-substitute developer has teamed up with ProMetic Life Sciences Inc. to obtain the exclusive North American licence for a new process to
recover proteins from human plasma.



COLD ALBERTA STOCK: IVANHOE ENERGY
IE-TSX $4.51
Down $1.26 (-21.8%) on 5,578,400 shares (for week ending Dec. 5).
The blood-letting continued for Ivanhoe, but what did you expect from an energy company based in Vancouver that lost $7.8 million in the past 12 months and had rocketed from 53 cents to $10.40 earlier in the year? We have yet to meet anyone who ever went broke
taking profits.