Prospecting for gold is – and has always been – a tricky business.
After a relatively quick run up in the value of gold, when’s a good time to consider taking another look? Recently, the Wall Street Journal examined the junior miners, and the good opportunities there may be for investors interested in wisely timing stock purchases of early-stage firms.
From Wall Street Journal:
“For too many investors, though, this pursuit of El Dorado ends up as a financial nightmare. Even if you are lucky enough to pick a miner that finds a rich vein of gold, you can arrive so early that your stake crumbles while the miner navigates the hurdles between locating a gold deposit and actually producing it.
“Despite the ‘great sex appeal’ of early-stage mining companies, ‘most just wash out,’ says Frank Holmes, chief executive of U.S. Global Investors, which runs a gold and natural-resources fund. Those that do find a viable lode often end up hamstrung for years by environmental or governmental delays that erode share prices.
“The best way to reduce your risk: Focus on junior miners that are within a year of production. And understand the lifecycle of small mining stocks before you invest.”
The WSJ explains that the lifecycle of a junior miner includes three distinct phases, and you should know which phase the company you’re researching may be in. They include:
Stage 1: Idea and exploration.
Stage 2: Discovery and feasibility.
Stage 3: Production.
Read more about the three stages and what they could mean for your potential investment in the Wall Street Journal’s coverage of when you should join the next gold rush.
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