Earlier today, I wrote up a nice long article for my mining stocks website. The article is about how to pick the right junior mining companies, and is written from a generic mining standpoint — it’s not about any specific types of mining companies, like gold or silver.
Still, almost every one of the tips/steps apply equally to gold mining. The reason I wrote the guide should be fairly obvious: picking the right junior mining stock is an amazing way to make a fortune with a small investment. Most junior stocks don’t earn a fortune, of course, and that’s why learning how to pick the company is essential.
Here are the steps/tips, in a shortened version:
Location. Depending on where the mines are located, you may or may not want to buy a stock. I try to buy stocks only in countries that have strong economic liberty — governments suddenly taking over your company could wipe out your entire investment.
Management. If a company is mined by a mining-business genius, you’ll get your money back, most likely. Research the management — better yet, get to know them. Regardless, find out everything you can.
Market. Pick a market where the need for the resource will be automatically increasing with time. For example, we know gold jewelry demand is outstripping new gold supply, so gold is probably a safe investment over the next few decades.
Mines. Pick a company that has good proven reserves — not that I said “proven.” Speculation from the company about how much they might have is obviously going to be a little biased. Just go with a company that has strong proven reserves, and a management team that can successfully acquire new properties if needed.
Remember, picking the right stock can be lucrative – but it’s also risky. Junior mining companies go under a lot more than the big guy. Investing in junior mining companies is probably more risky than just trading gold futures, but it’s also a lot more potentially lucrative.
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Tags: junior gold companies, junior gold mining, junior gold stocks