Gold Mining Shares

Owning shares in gold mining companies represents another way to invest in gold. These shares react in a leveraged way to the gold price, so they can be quite volatile.

There are two categories of gold mining companies: the seniors (producers) and the juniors (explorers).

The Seniors

The seniors have already been producing gold in large amounts. These companies are well-established on the market and have a large market capitalization, which provides more liquidity and less volatility than the juniors.

A few good values:

  • Barrick Gold Corp (TSE: ABX)
  • Newmont Mining Corporation (TSE:NMC) (NYSE:NEM)
  • Goldcorp Inc. (TSE:G)
  • Yamana Gold (TSE:YRI)
  • Polyus Gold (MCX:PLZL)

The Juniors

The juniors are mining companies with small market capitalization, generally under $500 million. They search for new deposits, and look to acquire land with potentially large deposits of gold. After acquisition, they have to assay the resources and start production.

A few good values:

  • True Gold Mining Inc. (TGM:TSX.V)
  • Pilot Gold Inc. (PLG:TSX)
  • Gold Canyon Resources Inc. (GCU:TSX.V)
  • Arian Resources Corp. (ARC:TSX.V; 0GT1:FSE)
  • WCB Resources Ltd. (WCB:TSX.V)

The juniors represent much more risk than the seniors because they operate at the exploration stage. This is also why their prices are more attractive and the gain potential is higher.

Shares in a Single Mining Company

Choosing a mining company is difficult and risky. Contrary to gold bars, a company may go bankrupt and the shareholder could lose everything. This is especially true of a gold mining company, because it’s a very difficult business with low profit margins. It takes a lot of time and capital to found a new mine, between 10 and 20 years to start operations. Furthermore, there are numerous problems to be addressed on the environmental, technical, social, and political fronts.

Before buying shares in a gold mining company, you must do due diligence on:

  • Its market capitalization
  • Its turnover and expenses
  • Its profits
  • Whether it pays dividends to shareholders
  • Calculating its PER
  • Total value of its assets
  • Liabilities (debt)
  • Its management team

Most of that information is available publicly on the Internet, but it is also possible to contact the company and request what you need to make the right decision.

Specific Criteria for Miners :

  • ​Project reports published by geologists and engineers 
  • Project location: proximity to other large deposits
  • The political and social environments of the countries in which the projects are located (choose a company that diversifies its projects in several geographic areas).

Gold Miners ETFs

In order to spread the risk over several mining companies, there are some trackers that provide an overview of a package of gold mining stocks: