Ahhhh ... summer heat, stock-market corrections, and juniors. What more can one ask for to soothe the soul? OK, so perhaps writhing would be more appropriate than soothing. But you know, heat happens every summer, the stock markets were due for a correction (especially after an 80% move higher since March 2009), and junior gold stocks will eventually return to favor.

It has no doubt been frustrating owning gold stocks of recent, especially the juniors. With gold achieving record highs it is natural to believe the gold stocks would mount material rallies and achieve records of their own. And based on their inherent risk, the juniors should have been exhibiting huge upside leverage. But with gold stocks continuing to lag gold (the HUI/Gold ratio remains at 2003 levels), the few remaining investors not selling into these crazy volatile markets have experienced wailing and gnashing of teeth.

While the summer doldrums may not be the best time to cheer for a rally, as long as gold's secular bull remains intact the gold stocks will have their day of reckoning and juniors will respond in fast and furious fashion. And with such fundamental underpinnings as gold investment demand just starting to heat up and ongoing production woes among the many, there is little arguing that gold's bull still has many miles left in the tank.

On the junior front, these little explorers heavily rely on stock-market capital to fund operations. But since junior investors are fickle and only have so much patience when they aren't being rewarded for the risk, this sector can melt down in quick fashion. And unfortunately if the capital is not coming in at a fast-enough pace, these juniors won't be able to perform their critical role in the gold supply chain.

But at risk of further hampering gold's structural supply problems if this sector flops, I don't believe we've seen the end of the junior glory days. In fact, for a variety of reasons which I've outlined in previous essays, the junior gold stocks are likely to have their best days ahead of them.

Fortunately it is amidst these sector struggles where the best bargains can be found. But in order to find these bargains investors need to do a lot of work on the research front. And for this reason our research house has dedicated the last 6 months to researching and profiling our favorite junior gold stocks for our popular reports.

Over the course of this gold bull the junior landscape has grown increasingly dynamic. And a key dynamic one must consider is this sector's size. With gold demand and hence its price on the rise, more and more juniors are hitting the markets in search of gold. We came across over 400 junior gold stocks trading in the US and Canada!

With hundreds of junior gold stocks to choose from, it is more important now than ever before to skillfully select your portfolio of potential winners. Until the junior complex mounts a concerted run higher and regains more mainstream popularity, only an elite group will outperform. And it is this group that will deliver the outsized rewards that investors should expect in return for owning these risky stocks.

The only way to perform unbiased research is to of course scrub the entire pool. And as you can imagine with such a large population this has been quite an undertaking. But after various levels of screening and filtering those elite juniors poised for success do eventually emerge. And with so many more gold juniors today, and quality ones at that, the bellwethers don't quite fit on one page anymore.

And since these juniors reside in such a wide assortment of stages, from small grassroots explorationists to large emerging producers, it has become increasingly important to segregate this sector for better comparative analysis.

Measured by market capitalization the juniors stretch across quite an expansive range. On one side are the classic penny stocks, those juniors trading at mere pennies per share with market caps well under $10m. And on the other side you'll find the mega juniors, some with market caps over $1000m.

But market caps don't necessarily tell you where these juniors are in advancing their projects. There are sub-$100m companies well-advanced in the development of their deposits, within just a couple years of commissioning gold mines. And then there are those companies pushing $1000m that aren't even close to producing an ounce of gold.

In most cases this disparity is simply attributed to deposit size. The near-term producers on the small side of the spectrum are bringing online smaller gold mines. These mines will most likely be pulling gold from a reserve base under 1m ounces, with annual production forecasted at well less than 100k ounces. And there is nothing wrong with small. Many of these stocks offer great value and have huge potential to reward shareholders.

On the larger side of the spectrum there are of course those market-darling emerging producers about to pour gold at high-volume low-cost long-life mines. But you also have those juniors still in the early stages of advancing massive gold deposits. Investors have caught on to the potential of their discoveries and want to take part in the growth.

Since this market-cap variance doesn't allow for a clean segregation as far as advancement goes, I believe the truest way to compare juniors is based on their project maturity levels. And the simplest categorical distinction is early stage versus advanced stage.

Now there is no definitive line that separates these two categories. In fact, in my research I've observed executives across the industry offer wide-ranging interpretations of stage criteria. All too often juniors are over-ambitious in marketing themselves, touting their projects as "advanced stage" when in fact they are nowhere near proving up reserves and developing gold mines.

Because of these inconsistencies I've drawn my own line. Simply put, and logically, advanced-stage juniors are closer to producing gold than the early-stage juniors. To me, project maturity and timeline to production are the key determining factors as to where junior gold stocks fall within these categories. Below I'll touch on some guidelines as to how these juniors can be separated.

As far as research goes, our two most recent Zeal reports focus on the opposing sides of this junior spectrum. And since the advanced-stagers aren't likely to remain juniors for as long as the early-stagers, we focused on this category first. In March we published a research report profiling our dozen favorites in this category.

Among these stocks are emerging producers, those juniors in the process of constructing quality mines. Also profiled are juniors with projects in the pre-development phase. These companies have performed positive economic studies based on current market conditions, and are either entering into or are within the final feasibility stage. They are on the cusp of mine development.

These next-generation miners should all be producing gold within the next few years. Of the 12 stocks profiled in this March report one will be a producer by the end of 2010, three are on track to commission their mines in 2011, five are anticipating production in 2012, and three hope to be mining gold by early 2013.

Following the completion of this advanced-stage report we spent the spring researching, identifying, and profiling our favorite 12 early-stage junior gold stocks, with the final product now hot off the presses. Now it is important to understand that this category does not simply consist of pint-sized juniors with only a few drill holes under their belts. In actuality some of these next-next generation gold miners may have already put a lot of time and capital into defining their deposits.

In general, these early-stagers are smaller with an average market cap of $167m versus $665m for the advanced-stagers. But just because they lag in project maturity, it doesn't mean an early-stager can't be larger than an advanced-stager. And indeed a handful of our favorite early-stagers are quite a bit larger than some of their advanced-stage counterparts.

While in many cases this size differential again boils down to potential deposit size, these early-stagers also vary in size based on their own differing levels of maturity. On the smaller side we see juniors that are thus far discoveryless. These companies are leveraging location or perhaps some promising initial exploration results, but have yet to make a meaningful find. While a handful of these super-risky juniors may make significant discoveries and greatly reward the speculators gambling on their stocks, most will likely fail.

In the mid-range of this category you'll find juniors that have made discoveries, but don't yet have enough data to define resources and perform advanced technical studies. In most cases these juniors have captured some attention from the markets, have raised record amounts of capital relative to their size, and are performing their most aggressive drilling programs to date. These companies are motivated to move their projects along and offer significant news flow to the markets.

On the most mature side of this category are those juniors that have given the markets a taste of what their gold deposits are shaping into. Many already have a round or two of resource estimates and are working on additional definition drilling in order to upgrade these resources. They are also working on drilling the open horizons of their mineralized zones, and have likely expanded their lab work to include metallurgical testing in order to better understand the complexity of the ore.

In some cases these mature early-stagers have put together a preliminary project plan that outlines a timeline to production, but at this point it is more of a guess than anything. Unless there is existing usable infrastructure that will allow for fast-track mine development, it is not likely these companies will deliver on their original targets. Mine development is a huge undertaking, and it is inevitable that the more advanced technical studies, permitting, financing, and construction will take longer than anticipated. This is why in many cases it can be 10 years or more between discovery and production.

As for deposit size, there are early-stage juniors advancing discoveries that have the potential to be in the big leagues. Drill results to date have hinted at simply massive deposits, and these rare elephants get a whole lot of attention. And some of these large mineralized zones have yet to see their first resource estimates.

But we know they are big, as even in these early stages a combination of regional geology and drill results allow us to recognize multi-million-ounce potential. Interestingly the top-performing junior of 2009 watched its market cap soar, making it one of the largest juniors today, and it has still yet to return a resource estimate. When it does, it is expected to be enormous.

When scrubbing these early-stagers, regardless of potential deposit size, what I want to see is progression. What are these explorers doing to advance their cause? Those that will emerge from the pack of course need to own quality deposits, but they also need to show initiative by aggressively gathering data to define and/or upgrade resources. And it is in their best interest to show investors, and the big miners, that their prospective undeveloped deposits have what it takes to get to the next level.

And believe me it is critical for the big miners to notice, as more often than not these juniors' fates lie in their hands. Reason being is it is a rarity for juniors to reach producerdom on their own. Of the small percentage that own gold deposits that are economically feasible to mine, the majority are absorbed into the senior circuit before the first ounce is produced. In fact, it is a near certainty that several of the 12 advanced-stagers profiled in our March report will pour their first ounce of gold under the ownership of a mid-tier or senior producer.

But while advanced-stagers do make for attractive acquisition targets, it is the early-stagers that are the sweet spot of junior M&A activity. The larger miners will pay premiums for grabbing these early-stage assets, but they are a lot cheaper at this stage than they would be once resources are firmed.

As is typical investors aren't usually privy to the knowledge of larger mining companies sniffing around the junior realm, which is why we have to assume these juniors can be taken over at any time. And you can be assured that if a junior explorer is returning out-of-this-world drill results, the big boys will be in the neighborhood. Quite often the best geologists on payroll at these larger mining companies are focused on M&A and not their own grassroots exploration. Much of their time is spent performing due diligence at prospective takeover targets.

And most juniors don't mind this attention. I've found that many of these companies aren't even interested in advancing their projects all the way to production. They actually run business models designed to stick with their bread-and-butter skills of exploration and discovery. When they advance their projects far enough they seek out senior joint-venture partners, or buyers, to shoulder the development burden.

One major reason for this strategy is skill sets. Just like many miners lack the exploration skills to renew their own reserves, most junior explorers lack the operational skills to build a gold mine. Mine development is inherently risky, and expensive, which is why in most cases it is best left for the larger deep-pocketed companies.

As an investor I always like to see a junior advance its project as far as possible on its own, optimally to production, as this affords the opportunity for maximum project leverage. Unfortunately this is a rarity, and all you can hope for is that your junior sells out for a healthy and fair gain. Once a junior is acquired the leverage on its individual project disappears as it is lumped in with a larger diversified portfolio.

But thankfully we don't need juniors to become producers in order to see share appreciation. In fact, those juniors skillful and successful as pure explorationists will greatly reward shareholders. As junior investors and speculators our challenge, and excitement, is found in identifying those rare juniors that have projects of high-enough quality that they could eventually be developed. Once found, we will be rewarded whether the junior brings a mine to life on its own or pawns it off.

And it is this early-stage group that offers such excitement. Since these juniors don't quite have their arms around the depth and breadth of the gold mineralization they have at hand, and a lot of work is left to be done, there is huge potential for upside surprises. And through diligent research one can find those stocks that have the potential for legendary gains.

Zeal's brand-new report profiles our dozen favorite early-stage juniors, all of which have incredible potential to capitalize on this gold bull. Even though we gravitate towards those juniors that have already made discoveries, a lot of upside remains, especially since many have yet to define their first resource estimates. These juniors are in the midst of an exciting season of news flow in the coming months and years. Buy this report today to have all 12 detailed fundamental profiles at your fingertips!

Though seasonals and technicals may not favor the gold stocks right now, this report will give you a fundamental read so you can put together your list and be ready to go shopping when the time is right. And of course if you are looking for guidance on the timing, I encourage you to consider subscriptions to our acclaimed weekly and monthly newsletters. Our next junior-gold-stock buying campaign will draw from these reports.

The bottom line is even though the spark has been hard to find, the junior-gold-stock flame will eventually be reignited. A lot of investors have been turned away from this exciting sector by the way these stocks have lagged gold. But since it would be fundamentally unfeasible for the juniors to fade into oblivion, those battle-hardened speculators staying the course are likely to be greatly rewarded as gold's bull charges forward.

You'll find that you won't have a more invigorating feeling in these markets than owning junior gold stocks as part of your speculative holdings. These modern-day 49ers offer investors a sense of adventure, allowing us to take ownership in a real-life treasure hunt. The risk is of course on the high side, but so can be the rewards. It is never too early to put together your junior-gold shopping list.