Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

The Second Best Time to buy Mining Stocks

IMG Auteur
 
 
From the Archives : Originally published December 03rd, 2007
756 words - Reading time : 1 - 3 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...





The absolute best time to buy a mining stock is just prior to the drilling of the 'discovery' drill hole which makes the nightly news and sends the penny stock soaring to extraordinary highs! (see Fig 1, Item 1-3, Discovery hole) This is a difficult task as statistics show that over 600 properties have to be drilled for each ore body that is discovered and subsequently made into a mine. It can be a daunting and expensive proposition trying to cover your bets by speculating in all the penny dreadfuls.

The experience we have enjoyed over the past 30 years suggests there is a second best time to buy mining equities. That is when a qualified management team is preparing to convert/construct a single 'ore body' mining company into a producing mine. A purchase of mining stocks during this development/construction period has produced significant gains with a favorable risk/reward ratio.

Mines are Not Discovered, They are Made!

Ore bodies are usually "discovered" during an "up-cycle" in metal prices as the mining industry and the speculative publics enthusiastically spend money on exploratory drilling. One or two discoveries are made and the enthusiasm spills over into all the penny exploration companies. It can take two to four years to fully "prove" a discovery while the short-term "up-cycles" in metals prices are often as brief as one to three years. Thus discoveries are often brought into production, made into mines, in the following (or possibly later) up-cycle in metals prices.

The difference between the real discoveries and the promotional clones is not always signaled by their price action in the stock market. They both go up during the general enthusiasm for the shares of any companies nearby the 'discovery' (Fig 1, Item 2, Anticipatory/discovery rise) and down when metal prices recede (Fig 1, Item 4, Confirmation/disinterest slide).




Figure 1: Model of Classic Mining Company Share Price Cycle

Companies with bona fide discoveries (those that will ultimately be 'made' into mines) identify themselves by continuing to spend money on their property when metal prices are cyclically weak, (Fig 1, Item 6, Development/construction period) and when funds are not as readily available from a now less-enthusiastic public, but rather largely from management and longer-term investors.

Buying discoveries can be fun and profitable, and is largely speculation. Buying qualified 'mine making' is investing that can yield significant returns with a favorable risk/reward ratio.

Investing in a 'single' ore body mining stock when it is being readied to go into production (Fig 1, Item 6) provides some of the lowest risk/highest reward mining industry investment opportunities. And results are even better if this period of pre-production/construction coincides with the trough in a market cycle for the stocks of the particular metal.

Low metal prices and disinterest from the speculator community (who often drive the prices of stocks to excess during the discovery period) combine to produce a very depressed price for a mining stock during the confirmation/disinterest slide (Fig 1, Item 4). This is precisely when a good ore body, financed by knowledgeable long-term investors and operated by qualified management, can be bought in anticipation of substantial gains during the pre-production and production period, compounded when metal prices recover from cyclical weakness.

The Big Payoff

There is significant capital gain potential as the market begins to anticipate and discount the production of metal and the consequent earnings (Figure 1, Items 6 through 8). The maximum appreciation is recorded if the mine is being readied for production during a period of metal prices weakness and begins pouring metal and generating earnings as prices are trending up again.

In thirty years of identifying ten such companies, all but one have equaled or exceeded their discovery highs by more than 100%! The price rises from their confirmation/disinterest lows to their production/cash flow highs have produced 300-1000% gains.

Conclusion

One of the best times to invest in a mining stock is during the construction - pre-production period when a qualified 'single' ore body mining management team is going about the work of 'making mines'.



By : Albert J. Matter



24hGold - The Second Best Time...


Albert J. Matter has over 30 years' experience founding, financing and building private and public companies, most recently, Gryphon Gold Corporation and National Gold Corporation, merger partner to Alamos Gold Inc. Mr. Matter served as Chairman of the Board from inception of Gryphon Gold in early 2003 to Sept 6, 2007 when he elected to retire as Chairman remaining a Director. From 1999 to December 2002, he served as President and Chief Executive Officer of National Gold Corporation.







<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Hyperinflation Defined, Explaine...
28 Julsam_site
From you money supply graph it's easy to see how the globalist-created Vietnam War, Civil Rights Movement and War on Poverty accelerated Big G...
The Jeffersonian Secessionist Tr...
28 Julsam_site1
Your article supports the notion that the south had every justification to leave the union because of the unfair tariff war triggered by the N...
The American Religion of Violence
28 Julfoleymanor12
very interesting. what a nasty bunch the northerners were
Japan's Lemming Syndrome
27 Julrjs2248
Let's all follow the leader (The FED). Once the first domino starts tipping the rest of the global Ponzi scheme will crash. The best outcome is to ...
The Odious Versus the Tedious
27 Juldennyc1
I don't know. Trump may seem incompetent; but the blue ribbon for incompetence must go to and remain with George Bunnypants Bush and his response t...
How a New Vision Rose From the C...
27 Julsam_site
Video is the usual globalist propaganda pushing diversity, immigration and the balkanization of white, mostly southern and Protestant America ...
Sernova, Diabetes and Haemophilia
27 Julsam_site
Because the internet is finally getting out the word that diabetes, like most diseases can be cured through complete 90-element nutrition, exp...
Tech Talk: The Cup and Handle Fo...
27 Julmscir1
I look forward to your TA articles. I hope you will consider covering OBV, Accum-Dist, and ADX, along with Bollinger Bands they seem to be useful f...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS