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Gold exploration companies carry more risk than typical mining companies, but they also carry
more upside potential. I try to target gold explorers that have high-potential gold deposits with exploration upside, favorable mining jurisdictions, close proximity to producing mines, and strong insider ownership. Here are three gold explorers that recently released positive drilling results, and my thoughts on each stock.
The comments above and below are excerpts from an article by Gold Mining Bull, as posted on SeekingAlpha.com, which have been enhanced – edited ([ ]) and abridged (…) – by munKNEE.com (Your Key to Making Money!)
to provide you with a faster & easier read.
I continue to search for gold exploration stocks that I feel will outperform:
- the price of gold,
- the benchmark gold miners index GDX,
- the junior gold miners index GDXJ, and
- the global X gold explorers ETF GLDX, a basket of early-stage and advanced-stage gold exploration companies that are high-risk, high-return type of stocks. A new gold discovery, positive drilling results, or an economically robust preliminary economic assessment or pre-feasibility study are a few catalysts that could send exploration stocks soaring.
Exploration stocks like the three I’m about to mention carry huge upside, especially if gold prices continue to rise.
- Higher gold prices increases interest in their projects and the chances of a takeover by a mid-tier or senior gold producer.
- Two recent examples:
- Goldcorp bought out Kaminak Gold at a 40% premium back in May, while
- West-African gold miner Teranga Gold bought out Gryphon Minerals at a 53% premium back in June.
- Two recent examples:
…Personally, I like to target companies with:
- attractive gold deposits in politically favorable mining jurisdictions,
- deposits located next to currently producing mines, as I think this increases the chances of a takeover,
- management that have some skin in the game (I look for heavy insider ownership of at least 5% of the outstanding shares),
- successful drilling results,
- deposits that are open in all areas for expansion,
- treasuries that are flush with cash, so drilling campaigns are fully funded and
- a management team that has a solid track record and plenty of experience as well.
Keep in mind, however, that there are still extra risks to owning shares of gold explorers.
- These companies are not producing any cash flow from operations, so they must issue equity to keep the lights on. There’s no guarantee they will be able to do so.
- There’s also no guarantee the deposits will turn into producing gold mines.
The investment could go bust for several reasons, so it’s important to be aware of the risks and only invest money you are willing to lose.
Here are three gold exploration stocks investors need to put on their radar following successful drill results:
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