Penny Stock 2013
Looking at investing in mining?
Hi I’m looking at investing in a mining company.
Its only recently floated on the market and is still in the process of setting up the mine with with hopes to start mining in mid 2013.
I would like I it if some one could give me some tips on what sort of research I should be doing?
I have never done any sort of investing and am very keen to learn and preform great due diligence.
P.S what are the chances that the company will start paying dividend and at what stage would they normally start looking at doing so?
This opportunity was not presented to me,I’ve seen potential in future markets and went looking for companies that are in that field
The company is due to start mining 2013.
Isn’t investing in a company while it is still young and a low stock price a good Idea?Surly once they start mining and making money the stock price will go up,If its worth $0.90 now when its not producing any income surly its worth more once it is?
JoeyV is a little cynical…perhaps he has been burned in the past.
It really depends on the mine and what the product of the mine is and the quality of the company doing the work. There are many scams in mining that is for sure but there are ways to ferret the good ones out.
You don’t say what mine this is….so how do you expect a good answer…you can only get generalities from the way you phrased your question.
You say the mine is due to start producing in 2013….Really…do you know how far along is their mine progressed? It takes anywhere from 5 to 10 years to get from exploration of an ore body to a producing mine….If the mining property is some isolated moose pasture far from transportation infrastructure there are roads to build, railway spur perhaps, Is the mine going to process the ore on-site….then a smelter must be constructed….is it in an environmentally sensitive area….permits are required…native land claims can get in the way sometimes…..there are many many hurdles to overcome.
Have the completed their exploration? Have they established the size of the ore body? Have you seen the drilling results?
If the discovery is one year old and they say it will be in production in 2 years….probably they are less than honest….could be a scam.
There are companies that all they do is the exploration part….they establish the size and quality of the ore body and then sell it to someone else to do the development to production. If this is them…then what is their track record, do you know? Probably not
Buying into a junior at this stage is VERY VERY risky…though it can be profitable for short swings. They really have nothing to sell to investors other than HOPE and Dreams….so the excitement is generated in periodic drilling reports….you can catch a run on these reports but NOT a long term investment.
You buy junior mines for their capital growth…not dividends. Established gold mining companies like Barrick or Gold Corp who do issue dividends, are very stingy with the size of the dividend considering the share price. A newly created mine with infrastructure costs does not make money from the get-go of being a producer….it can take a year or more to make a dent in that debt it racked up….
If you find a winning Junior penny mine….a producing mine showing positive returns…you can double, even quadruple your initial investment if you choose wisely in 1 to 2 years. What you hope for is that the junior mine will become an attractive takeover target by a more senior company and you will make money on the excitement to the deal and usually a bonus of a jump in price when a deal is struck….
Unless you have tools to do that evaluation though, simply buying a cheap mining stock is not a guarantee to future riches.
Another thing to watch for is over-estimating the value of a mine….especially a gold mine. Remember they are generating excitement at first so they will estimate the ore body…multiply the metal by its current price and say the mine is worth that much….is this true? Not really…who knows what the price of that metal will be 5-10 years from now…if it is an odd-ball mineral that is in hot demand now…who knows the demand in future? It is a gamble.
Many many things to consider when looking at junior mines….you can make a lot of money on good choices and lose a lot on bad ones….trick is finding the good ones and that takes a lot of work on your part.