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 :0 (0 vote)
>> Next article
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Gold: April 2015 Update
30 Marovertheedge
"I have been invited to speak at the Mines & Money Mauritius Conference in June 2015 again. If you would like to join you can receive 25% off your ...
Greece Needs the Magic Formula t...
30 Marovertheedge
Wow dude. "Idiocracy" is obviously not just another dumb-ass movie. I admit that I should have recognized your devotion to Brawndo (it has ...
The Finanser Interviews Jon Matonis
29 Marovertheedge
"In late 2009, I got introduced to Bitcoin by a random email from Satoshi Nakamoto. I didn’t give it much thought at the time and then 3-4 months ...
Gold Effect on Mining & Shale Wa...
27 Maruser4779-1
A jumbled and rambling article, seasoned with hyperbolic rant, but redeemed by interesting information. So 3/5. A good editor could turn this into ...
Oil Surges, Gold and Silver Spik...
26 Marovertheedge
"That a country would choose to directly intervene militarily in the affairs of another country is a dangerous precedent, ..." Precedent?<...
Water Wars Loom Over California ...
26 Marovertheedge
Ellen Brown should stick to what she understands versus geology, hydrology and financially available technology. Example: "With discussions...
Kicked to the Curb
24 MarFalconflight2
I'm both ashamed and disgusted by the government 'of, by, and for the people,' every bit as much as I am ashamed and disgusted by the People.
The Silver:Gold Ratio, 1687-2011
24 Marconey1
"large new deposits of silver were found"? So what was found by ECB that enabled them to cough up an extra trillion euros for failing European econ...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Trevali Mining(Cu-Le-Zn)TV.TO
Commences Mining at Caribou Zinc Mine in Anticipation of Q2 Mill Commissioning
CA$ 1.09+6.86%Trend Power :
Corporate news
Rockcliff(Cu-Ni-Pl)RCR.V
Solvista Gold Corporation and Rockcliff Resources Inc. Enter Into Letter of Intent Regarding
CA$ 0.04+16.67%Trend Power :
Corporate news
Pele Mountain Res.(Ag-Au-Cu)GEM.V
Executes MOU with Major Chinese Rare Earth Player to Pursue Opportunities of Developing Rare
CA$ 0.05+66.67%Trend Power :
Corporate news
Duran Ventures(Ag-Au-Cu)DRV.V
Signs Memorandum of Understanding for Tolling Operation in Peru
CA$ 0.02+50.00%Trend Power :
Corporate news
Waseco Res.(Ur-Au-Gems)WRI.V
Announces Non-Brokered Private Placement
CA$ 0.04+0.00%Trend Power :
Financings
Metanor(Au-Pa-Pl)MTO.V
Intersects 8.64 g/T Over 5.8 Meters at Bachelor Mine
CA$ 0.04-11.11%Trend Power :
Corporate news
Hudson Res.(Ag-Au-Cu)HUD.V
Reports Robust Preliminary Economic Assessment (PEA) for Specialty Alumina Production From th
CA$ 0.50+0.00%Trend Power :
Corporate news
Western Copper(Cu-Le-Zn)WRN.TO
and Gold Provides Casino Update and Reports Year-End Results
CA$ 0.58-3.33%Trend Power :
Corporate news
Western Copper(Cu-Le-Zn)WRN.TO
and Gold Provides Casino Update and Reports Year-End Results
CA$ 0.46-2.09%Trend Power :
Corporate news
Corona Gold(Ag-Au)CRG.TO
Provides Update on Voluntary TSX Delisting and Application for Listing on Canadian Securities
CA$ 0.31+3.33%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.