Investing in the mining sector in an attempt to profit from the bull market in precious metals can be successful for those investors who understand the industry. Others may come up on the lucky side simply due to the overwhelming price advances of gold and silver.
In past precious metal markets, the mining company stocks have tended to move in the same direction of the underlying metals, but their volativity have far surpassed that of the metals – sometimes causing exponential price fluctuations compared to the price changes in metals.
This is largely due to the fact that investments in miners are essentially investments in the stock market. Hence, they are vulnerable to anything affecting the general economy and can move in the opposite direction of the metals, depending on circumstances.
The mining stocks are particularly vulnerable to political climates and even environmentally-motivated uprisings in countries where the companies are mining. For example, Hugo Chavez announced that he is nationalizing Venezuela’s gold miners. And in Peru, after the latest round of elections, the newly elected president, Ollanta Humala, would definitely like to have a share of the miner industries’ profits in his country, but it isn’t clear if or how that may happen. Nevertheless, just the rumors of government intervention of any kind can send a stock down dramatically.
Between the threats of government intervention or increasing mining taxes and environmental concerns, one walks a tight rope in determining companies in which to invest.
On top of these factors, the investor must decide which market-cap range is the best area of investment.
- Large Cap (Market Capitalization in Billions of dollars & well established)
- Mid Cap (Market Capitalization in high Millions of dollars)
- Small Cap (Market Capitalization in low Millions or unestablished)
Large caps can be more stable, but not have much growth potential. In fact, most large caps depend on buying up small and mid caps in order to sustain growth. Some small caps can yield huge returns. But some are risky because they can run out of cash and go belly-up before any significant find is established. The trick is knowing which ones have the greatest potential.
So it is worth repeating…if the investor doesn’t know the industry, then perhaps a better label for the activity of investment would be gambling.
But there are knowledgeable people in the industry. And one way to take advantage of that knowledge is to invest in minor-related ETFs and Mutual Funds. These types of funds hold baskets of various stocks, chosen by the funds’ management.
Below is a table of some precious metal equities, but it should be noted that these are not recommendations – each investor should initiate his/her own investigations prior to making any investments. The table is provided for informational purposes only.
Disclaimer: The author either owns, has owned, or is contemplating owning the listings in this table.
|Stock – AgniCo Eagle Mines Ltd|
|Stock – Eldorado Gold Corp|
|Stock – Goldcorp|
|Stock – Kinross Gold Corp|
|Stock – Pan American Silver Corp|
|Stock – Silver Wheaton Corp|
|Stock – Silvercorp Metals Inc|
|Stock – Yamana Gold Inc|
|Mutual Fund – Tocqueville Gold|
|Mutual Fund – U.S. Global Investors Gold & Precious Metals|
|Mutual Fund – U.S. Global Investors World Precious Minerals|
|ETF – Market Vectors Gold Miners|
|Mid & Small Caps|
|Stock – Almaden Minerals Ltd|
|Stock – Bayfield Ventures Corp|
|Stock – Columbus Gold Corp|
|Stock – East Asia Minerals|
|Stock – Fortuna Silver Mines|
|Stock – International Tower Hill Mines Ltd|
|Stock – Trade Winds Ventures Inc|
|Stock – Exeter Resource Corp|
|Stock – First Majestic|
|ETF – Market Vectors Junior Gold Miners|