Gold Rush at The Wall Street Journal?
Source: Seeking Alpha, Tim Iacono (3/8/10)
"Main Street investors always want in on the ground floor of. .the next gusher or mother lode."
Jeff D. Opdyke's report is a fairly complete description of what the junior gold mining sector is all about and it's in the free section of the Journal.
Should You Join the Next Gold Rush?
Main Street investors always want in on the ground floor of the next Microsoft or Google, or, in the commodity world, the next gusher or mother lode.
At a time when gold is above $1,100 an ounce and some expect it to go far higher, a lot of investor energy is focused on the so-called junior miners. These are the tiny mining firms that often own little more than a piece of land, some geology studies and dreams of El Dorado. So much cash has flowed into the TSX's small-company Venture Exchange—where mining firms in 2009 raised nearly $3 billion Canadian dollars—that its total market capitalization surged by 112% last year.
For too many investors, though, this pursuit of El Dorado ends up as a financial nightmare. Even if you are lucky enough to pick a miner that finds a rich vein of gold, you can arrive so early that your stake crumbles while the miner navigates the hurdles between locating a gold deposit and actually producing it.
He goes on to discuss the different stages of a gold mining company - from the pure explorers to near-term producers to the producers themselves - and then recommends picking stocks where the company is within a year of production.
You'd think that the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) would have been worth mentioning here since it is a first-of-its-kind product, launched late last year, that offers many advantages (and some disadvantages) over selecting individual stocks.