Mining Companies

Junior Gold Mining Stocks

Gold is a tier one financial instrument recognized throughout global economies as the ultimate store of value. Gold miners may be a solid investment as well, but it can be tricky figuring out which gold mining companies are best suited for your portfolio. At Proven & Probable, we help take the mystery out of investing in Canadian gold mining companies and gold miners around the globe.

Why invest in gold miners?

Gold bullion is viewed as a prudent, attractive hedge against economic crisis. A speculator may expand their exposure with gold in their portfolio with gold mining companies. Gold miners underpin the available gold supply by their exploration and production activities. For investors, mining companies offer speculators exposure to gold with liquidity.
Unfortunately, in most cases, the price gold miners receive for the precious metal they produce is determined by factors beyond the control of any one variable, such as All-In-Sustaining-Costs, Geopolitics, Permitting, and Key Personnel. This is why selecting gold mining stocks for your portfolio may seem overwhelming. Solution: Proven and Probable.

Junior mining companies

Among mining stocks that we report on are junior mining companies. A junior mining company is an exploration firm whose sole focus is to discover new deposits of gold. They are involved in the exploration and development phase, constantly searching for opportunities with the best chance to supply gold deposits worthy of production.

Unlike an end-to-end gold mining organization, a junior gold miner often does not have its own production operation. Junior miners can be seen more as a venture capital firm because they typically rely on venture capital for financing its activities.

While some ambiguity lies in the precise definition of junior miner, they are typically a low-cap stock, with market capitalization usually under $50 million U.S. dollars. They are often thinly traded, and in some cases may not trade on a given day.

Investing in junior mining

One of the challenging aspects of speculating in junior mining stocks can be the very nature of their business model. While mining production outfits generate their profits from the extraction ore deposits, junior miners are more research and development focused, through exploration and development.  
 
In many cases, a junior miner might turn out to be a “fly by night” operation that closes its doors quickly when the exploration costs exceed the value of their discoveries. Some get into the business as a get-rich-quick scheme, only to find out how long uncovering a lucrative gold deposit actually takes. 
 
As a speculator, Proven and Probable may assist you in identifying the difference between a legitimate operation and a fly-by-night company.
 

The good news is that if you’re able to find a junior gold miner before it “hits the mother lode,” you could be rewarded handsomely for your speculation. Many junior miners are penny stocks with potential for incredible upside.

Volatility associated with junior mining companies

While speculating in junior mining companies may be volatile as a rule, the rewards can be life and may even create multi-generational wealth. Most of them run on limited capital to strike it rich, and their success depends largely on a number of variables.  Before you deploy your capital, we can sift through the wheat and chaff to provide answers to these variables.

If the price of gold drops suddenly, mining exploration may no longer be financially feasible. So, if the mining company fails to discover an economic deposit before the price recovers, it may have no choice but to close its doors. During times when the price of gold is falling, junior miners with high development costs can face extended losses, which can eventually cause gold miners on the edge to shut down and potentially file for bankruptcy. That may be good for investors holding onto more efficient or better capitalized companies, but those who held paper on the marginal operators could be out their entire investment. Consequently for the speculator, this may present a unique buying opportunity through optionality and/or arbitrage.
 
One advantage of investing in gold mining companies is that performance isn’t always correlated to the broader economy. Gold prices rise during periods of economic crisis as a result of more demand, which can make associated mining stocks rise as well. On the other hand, gold mining stocks don’t always rise as much as other investments during times of economic prosperity.
 

In general, smaller gold mining companies success depends on their exploration results, jurisdiction, and key personnel, juxtaposed directly to immediate price moves of the underlying bullion. The gold price varies on the participation of Central Banks and Commercial Banks buying and selling gold, and citizens confidence in their respective currencies. Therefore, the gold price is less affected by the extraction of gold from gold mining companies and more affected by other mitigating factors.

Junior mining expertise

At Proven & Probable, we look at mining companies in Canada and throughout the world. Our analysts understand that mining companies – especially junior miners – carry a risk/reward component that is unlike many commodity-based industries. Therefore, these stocks may not be suitable for every speculator.
 
Junior miners are typically considered truly speculative. For those who seek a strong upside move for modest investment, junior mining companies may be the answer. We can help with that answer.
 
Proven and Probable conducts site visits and interviews with junior mining company CEOs and geologists at firms listed on the New York, Toronto, Frankfurt, and Australian Stock Exchanges.  We have earned the trust of the most respected names in the industry, allowing us to gather the best information to inform and support your next mining stock investment. We identify undervalued junior mining opportunities and help avoid disaster before others see it coming.  
 

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