Saturday , 23 October 2021

The 3 Most Important Factors to Consider When Selecting Junior Gold & Silver Companies

Market timing is important, but over the long run, company selection is more important…Here are the three most important factors to consider when selecting junior gold (and silver) companies.

  1. Fundamental Quality
    • …There are many aspects to a company’s fundamentals, but the most important is the economic value and potential of its projects and/or mines.
      • For producers and developers, we want production growth.
      • For explorers, we want discoveries or value addition to an existing discovery or deposit.
    • Size is essential.
      • Junior producers need to have production potential of 100K oz Au/yr.
      • Junior explorers should have projects with 3M to 5M oz Au potential or +2M oz Au potential if high margin potential.
  2. Odds of Success
    • Most projects fail because mining is very difficult, and it only takes a single fatal flaw to doom a project.
      • Ask yourself the odds the company can execute on its value proposition…
      • Ask yourself if management has
        • built a mine?
        • sold a company?
        • grown a deposit?
        • sold an undeveloped project?
      • Determine if this a jurisdiction in which majors operate
  3. Upside Potential
    • Assessing upside potential is essential because it is another way to define value. Some companies may be similar in fundamental quality and odds of success, and therefore upside potential becomes a tiebreaker.

At present, these three factors are of equal importance. Should the Gold price break weekly, monthly, and quarterly resistance of $1900/oz, then upside potential becomes increasingly important and fundamental quality less so.

For now, I’m focused on finding quality juniors with 7 to 10 bagger potential over the next two to three years. The recent decline in the sector has priced out much of the risk in these stocks and enhanced the potential upside for new buyers. 

Editor’s Note:  The original post by JORDAN ROY-BYRNE CMT, MFTA has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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