Mining investment for the layperson
Share Article
Mining investment for the layperson
Lessons for investors interested in buying shares in junior exploration companies
By Leon Louw founder of WhyAfrica and editor of the WhyAfrica magazine.
In September 2012 I attended MINExpo in Las Vegas, arguably the greatest mining show on earth. Where I got hold of the book “Mining Explained, a Layperson’s Guide” published by the Northern Miner, I cannot remember. It has served me well over the last decade though.
The 11th edition covering basic geology, prospecting, sampling and drilling, mining methods, metals markets, and investing in mining has a special place in my growing collection of books about natural resources, mining and the politics and history of Africa.
Investing in juniors
This week I decided to read it again, which will probably be the 5th time over the last 12 years. On page 102 I came across the following which I though was still relevant:
“Investing in “juniors” is much more speculative than investing in larger companies. Junior exploration companies offer high returns if they are successful. The other side of the same coin is the higher risk that they will fail.
“Understand that the junior exploration game is a gamble and keep the rent money out of it. The buy-low/sell-high bromide means more here than anywhere else in the market for once the stock’s price is up and everybody is talking about a great mining play at Dead Cat Falls, the easy money has probably been made.
Beware of promotions
Beware of promotions. Be extremely wary of information from Internet chat rooms and bulletin boards. Some of the people posting bullish statements are long on the stock, while some of the negative messages may originate from professional short sellers.
“Remember, too, that there is little or no regulatory oversight of newsletter writers and many are on the payroll of the companies they are recommending. While some newsletters provide quality information, others are purely promotional. Stick with experienced, respected newsletter writers and avoid the rest.
“Invest only what you can afford to lose. Remember that prospecting is a gamble. Consider the management carefully; is there an experienced prospector or mining professional who can pilot the venture successfully?”
“Mining Explained: A Layperson’s Guide” was edited by John Cumming and published by Doug Donnely.
Mining investment for the layperson
