Precious Metals Mining & Exploration Stocks


Properly trading and investing in good gold, silver, and platinum mining stocks can be extremely profitable. Good mining stocks follow both short and long-term gold and silver market cycles. Moreover they generally outperform precious metals market prices.

Not all precious metals mining & exploration stocks are equal. Many mining companies are inefficient and never turn a profit while many exploration companies never find significant resources. If your selected mining company isn't profitable, it should at least have significant resources and if your exploration company doesn't have significant . Major mining companies have both and perhaps represent the safest investments in the industry.

As you can see from the chart on the right, Goldcorp (GG), the world's second largest gold mining producer, has a price pattern that is similar to that of gold. Moreover, its price is significantly leveraged. In other words, if the price of gold jumps 5%, then GG will likely jump 10%.

Goldcorp is a good value not just because it's the world's second largest gold producer (with 2.32 million ounces of gold produced in 2008) but because it has increasingly valuable assets.

- Goldcorp's total proven and probable reserves stands at 46.3 million ounces, located in some of the most mineral-rich properties in politically stable countries.

- Goldcorp produces gold at far less than its value. With an average total cash cost of just $ 305 an ounce, the company can presently sell gold above $ 925 for a net profit of $ 620 an ounce.

- The company has valuable real estate including hundreds of thousands of acres worldwide, mining equipment, and infrastructure.

- Goldcorp has a significant stake in many junior mining companies; for example, it recently acquired a 12.9% stake in Osisko Mining (OSKFF).

With such assets, it's easy to see why Goldcorp and other good gold mining companies give investors real value. To top it all off Goldcorp offers investors a monthly dividend. The aforementioned can be said about Silver Wheaton (SLW) and other good major silver mining companies.

Nonetheless, stocks like GG won't deliver investors the highest profits in the mining industry. The highest earners know that the best plays are in speculative exploration stocks. Of course there's more risk involved, but if you pick the right ones then the rewards can be higher than anyone's guess. The chart to the right shows a speculative exploration company that is more leveraged to the price of gold.

Good junior exploration companies are not usually profitable. They are like start-ups that are developing into mining companies or preparing to be acquired by larger mining companies. Rubicon Minerals (RBY), is a good example because it embodies what a good exploration company should have:

- A skilled and experienced geological and exploration team.

- A significant stake in mineral-rich properties, preferably in established gold-producing regions (preferably located near existing mining camps).

- A recently confirmed high-grade gold or silver systems through well financed exploration programs.

- A higher stock price leverage-to-metal ratio than the major mining stocks.

The key is to spot these speculative plays when they are undervalued and when the price of gold is at or near a cyclical low. The way to do this is by not only market analysis but by reading a company's annual report and quarterly filings and following its press releases and news items. That's why we provide a wealth of resources to help you find the mining stock that can deliver the most value to you.