Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.
While sometimes risky, mining stocks can also be strong performers when commodity prices move up. However, due to the volatility of these stocks, Pat McKeough recommends that they only form a modest part of a well-balanced portfolio.
Canadian penny mining stocks are some of the riskiest stocks you can buy. These companies are trying to find mineral deposits that mine at a profit and such a find are exceedingly rare. Because of this, it’s even more important to look for investment quality in penny mines.
For example, we automatically rule out investing in penny mines that promote themselves too aggressively or do so misleadingly. The mine-finding effort is more likely to succeed if the managers focus on finding a mine rather than hyping their stock.
Junior mining stocks are usually smaller companies that typically take on riskier mining projects. However, if a junior mining stock is successful at finding and mining, it can mean huge returns for investors.
No matter what type of mining stocks, or other stocks you invest in, TSI Network recommends following our three-part Successful Investor strategy:
– Invest mainly in well-established, mostly dividend-paying companies;
– Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities);
– Downplay or avoid stocks in the broker/media limelight.
Uranium stocks offer long-term promise—here’s how to pick the best ones.
Uranium stocks are shares in companies that explore for, mine and refine the metal uranium.
Uranium’s long-term outlook is positive, but supply remains much higher than demand. Low oil prices should also keep prices down in the near term and could slow the construction of new reactors. If you want to invest in uranium stocks, here are the best ways to cut your risk.
Hidden value, explosive profits
Hidden value can produce your biggest gains. It shows up in well-known stocks that are about to unlock the potential of their hidden assets. And in rising growth stocks that the market hasn’t caught up with yet. Pat McKeough shows you the secret in his exclusive report, Canadian Value Stocks: How to Spot Undervalued Stocks.
Consider the geographic risks of investing in uranium stocks.
Many emerging countries, such as China, India and Russia, are increasing their nuclear-power use as they switch from power plants that run on coal and oil.
While this looks promising, investing in uranium stocks does entail some unique risks. With any mine, for example, there is a long lead time from exploration and discovery to production. That’s especially so with uranium, which needs extra regulatory approval because of its radioactivity.
Like any investment, look at the fundamentals of uranium stocks.
We like to see strong fundamentals in the uranium mining stocks we recommend. We look for low debt, because debt can be a problem for any mining company. When we recommend uranium mining stocks, we want to see a positive cash flow, preferably even when uranium prices are low.
Even better, we like to see mining companies that have cash flow from an existing mine that is sufficient for, or at least contributes to, the cost of developing a second mine.
We look for uranium stocks that have an experienced management team. We like to see teams that have a history of mine development and have financed similar projects in the past.
Exercise caution when investing in junior uranium stocks.
If you are interested in undertaking your uranium investing through junior or penny stocks, we recommend well-financed junior mines with no immediate need to sell shares at low prices, since that would dilute existing investors’ interests. The best junior mines have a major partner who has agreed to pay for the drilling or other exploration or development, in exchange for an interest in the property. We also prefer those that operate in an area with geology that is similar to that of nearby producing mines.
Invest in uranium stocks with a diversified reserve base.
Invest in uranium stocks with a broad base of operations. Even if the company has strong reserves, the best mining company stocks with the least risk also have a diversified reserve base. That way they are not dependent on a single mine’s production or political stability in any one country. Mining companies can also increase their reserves by making acquisitions—with mineral prices down from their record highs, you may see an increase in mining company acquisitions at distressed prices.
You need to look at how long the company’s reserves are likely to last. Those with low reserves need to have consistent success in their exploration programs to maximize the production of the mine and the surrounding area. That success is far from guaranteed.
Bonus Tip: Diversify the resources segment of your portfolio with other energy stocks.
We recommend that most investors maintain some exposure to the Resources sector—including energy stocks—as part of a well-balanced portfolio.
The direction of energy prices depends on a lot of things, particularly economic growth rates around the world. Meanwhile, though, well-established companies in the energy industry can take advantage of the setback to pick up properties and employees who might be harder to find in more prosperous times.
Gold company stocks are a better investment than many gold investors realize
All investments come with a mix of risk and potential reward. The greatest danger comes when you understand the mechanics of an investment, but you’re missing some of the details. Your understanding of the… Read More
Both revenue and cash flow have fallen for this drilling contractor, but it should benefit as miners try to access increasingly remote deposits of ore, oil and gas.
MAJOR DRILLING (Toronto symbol MDI; www.majordrilling.com; No dividends paid) is a large contract driller that mainly serves… Read More
The gold, silver, copper and zinc miner significantly increased its output in the latest quarter—a move that’s lifted revenue as well as cash flow.
HUDBAY MINERALS INC. (symbol HBM on Toronto; www.hudbayminerals.com) produces base and precious metals including copper, zinc, gold and silver.
The company first… Read More
Silver investing gains popularity when gold prices rise, but do you know how to invest in these stocks properly?
Silver attracts a lot of interest as gold prices reach levels that seem too expensive for the average investor. Silver is sometimes known as “poor man’s gold”… Read More
Pat McKeough recently replied to an Inner Circlememberlooking for an opinion on this mining stock. The company aims to mine one of Alaska’s largest copper/gold deposits, says Pat. But it faces opposition.
Q: Hi Pat. I am considering Northern Dynasty Minerals (NDM) for the aggressive part… Read More
The miner expects to significantly increase its spending on a new mine to boost its output and strengthen its cash flow.
NEW GOLD (Toronto symbol NGD; www.newgold.com; no dividends paid) has four mines: the Mesquite project in the U.S.; Cerro San Pedro in Mexico; the… Read More
The best Canadian gold companies will generate positive cash flow even with low gold prices
Most Canadian gold companies’ shares will continue to be heavily influenced by the direction of gold prices. Meanwhile, though, the best gold stocks will generate positive cash flow even with low… Read More
Junior mining stocks have strong profit potential—but they also have risk to match
Mining companies can generally be broken down into two categories, majors and juniors. Majors are typically mining companies that have been in the mining business for many years, and more often than not… Read More
The miner’s cash flow could nearly double in 2017 on stronger prices for metallurgic coal but also zine and copper.
TECK RESOURCES LTD. (Toronto symbol TECK.B; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steel making. It also produces copper and zinc.
The… Read More
The gold miner’s cash flow has soared as gold prices rise and it prepares for full production at its new operation.
ALAMOS GOLD (Toronto symbol AGI; www.alamosgold.com) owns the Mulatos and El Chanate mines in Mexico, and the Young-Davidson mine in northern Ontario. That Canadian… Read More
Before we discuss ways you might put gold in your RRSP in 2017 (despite last year’s volatility), let’s look more closely at those price fluctuations. In 2011, gold shot up to a high of $1,950 U.S. an ounce. Gold prices have fallen since then, and… Read More
Cameco Corp. is still profiting from long-term contracts despite the low level of uranium prices. But with 66 nuclear reactors under construction around the world, the long-term outlook for this major uranium miner is positive.
CAMECO CORP. (Toronto symbol CCO; www.cameco.com) is the world’s biggest uranium… Read More
Hecla Mining Company used big increases in its gold output to expand its cash flow. Its new mine in Mexico is expected to bolster profit with its easily mined silver deposits.
HECLA MINING COMPANY (New York symbol HL; www.hecla-mining.com) explores for, mines and processes silver and… Read More
Investors looking for gold returns can make the right moves—or the wrong moves
The price of gold appears undervalued to many investors in light of the expansion of the money supply by many governments and the risk of inflation. Those investors believe that this is excellent… Read More
Finning International Inc. lifted its earnings in the latest quarter despite low commodity prices and their impact on sales of its heavy equipment.
FINNING INTERNATIONAL INC. (Toronto symbol FTT; www.finning.com) sells and services Caterpillar-brand heavy equipment in Canada, South America and the U.K. Its main customers… Read More
The best mining company stocks will have a record of success and a strong management team
Mining company stocks involve the exploration for, and the development and production of minerals. While sometimes risky, mining stocks can also be strong performers when commodity prices move up.
We think… Read More
The gold miner now has the regulatory approvals and funding needed to build a mine for its Brucejack project in B.C.
PRETIUM RESOURCES INC. (symbol PVG on Toronto; www.pretivm.com) continues to work toward building a mine for its Brucejack gold project in northwestern B.C.
The company’s president… Read More
Lower costs and the sale of a niobium mine in Quebec, combined with higher gold prices, have boosted revenues and cash flows for one of our leading buys among Canadian junior gold stocks.
IAMGOLD (Toronto symbol IMG; www.iamgold.com) owns 41% of the Sadiola mine in… Read More
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