Best Time to Be a Mining Stock Investor

Awaiting assays is an exciting time for a mining stock investor 

James Fraser | December 20, 2016 | The most exciting time to be a mining stock investor is when an exploration company is drilling and awaiting assays.

Three companies at this exciting stage right now are Fiore ExplorationRedstar Gold, and Prosper Gold.

The potential for life-changing returns is possible.

Very few sectors offer the potential return of a mining stock in the discovery/speculation phase.

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Sprott’s President and CEO, Rick Rule says, “Speculation is where the big money is made; however, that is where the big risks are.”

It is said that roughly 1 in 3,000 anomalies actually get to the stage of an economic mineral deposit.

Mineral deposits are rare and because of this, they become extremely valuable. This leads to the potential for a 2X, 5X, 10X, 50X, or even the elusive 100 bagger.

If the drill bit hits significant mineralization, it could be the start of huge gains.

NexGen Energy serves as a good example from the past few years. NexGen Energy’s stock has gone up eight times since the initial discovery was made, based on excellent uranium drill holes in Saskatchewan. This has occurred even in a depressed uranium market.

Finding a mineral deposit can be similar to putting together a complex puzzle.

The first step in a company’s process is staking or acquiring a project. At this stage, the company likely has a thesis for a mineral deposit based on geological structures (type or rocks, faults etc.)

The second step involves boots on the ground work and may include sampling (soil and rock), geophysical surveys, and mapping. Typically, the results from this work will have little to no effect on the share price. The goal here is to find any potential drill targets.

The third step and the most exciting for shareholders is drilling. A drill rig is referred to in the industry as the “truth machine” because it reveals if any mineralization lies below the surface. Good drill holes lead to significant share price appreciation.

If future drill holes continue to hit mineralization and the project becomes de-risked a takeover from a bigger company is likely.

With the rise in metal prices in 2016, companies have been raising money and spending funds drilling. Summer and fall drilling programs are finishing up now and have the labs much busier than the last couple years. Majors have also been keeping the labs busy with drilling to replace reserves/resources for year-end updates. Busy labs are causing some delays for companies and investors.

In regards to considering investments in mining, Sprott’s Investment Executive Steve Todoruk says, “I believe that one of the most exciting — and potentially rewarding — ways to invest in the mining sector is through shares of small companies that have just announced a new, potentially large, mineral discovery.”

Below are three exploration companies that are currently awaiting assays results and deserve to be on your investing radar.