Richard (Rick) Mills
Ahead of the Herd
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As a general rule, the most successful man in life is the man who has the best information
There's a lot going on in the world - from Trump being elected in the U.S. to turmoil in the middle east, the China Sea and Turkey, Russia is flexing it’s still considerable might, North Korea’s flinging it’s nukes helter skelter, Japan’s rearming, disease runs rampant and fear escalates about virus mutation, there’s shortages of fresh water with many rivers not reaching their former endpoint and of course climate change is rearing its head to destabilize natural rhythms or cycles. It’d be hard to go back in history and pick a period of time when things weren’t so combustible.
Your author believes gold and silver have never been better safe-haven investments. Inflation, world events, diversification - gold and silver bullion do offer investors leverage.
So too do resource related equities. Junior resource companies, financed to near term production, currently offer the greatest leverage to increasing demand and a rising gold/silver price. This is where the money will be made in the next two years.
It’s a fact junior mining companies outperform senior miners at finding new mineral deposits and generating wealth for stakeholders…
“These are among some of the findings released in a study conducted by resource company strategist MinEx Consulting, which analyzed the performance of explorers and producers operating in Canada between 1975 and 2014. What the consultancy firm found is that, in the last decade, junior companies were responsible for more than three quarters of all new mineral discoveries and were approximately 30 percent more effective than senior companies at generating wealth.”
Aheadoftheherd.com’s editor isn't looking for huge producers with so much overhead that they can't profitably mine an ounce of gold. I'm not looking at huge mines with billions and billions of dollars in capex. I'm much much more comfortable with smaller mines having lower capex and under-control operating expenditures.
If you want to invest in the building of something of value – be there as the company moves it’s mineral deposit down the development path towards a mine there are a very few quality junior companies to choose from. Even fewer with the studies done and money already raised to get into production.
These are the situations that are an enormous opportunity to back excellent management teams with your investment money.
Let's look at why companies aren't making a profit:
- One of the biggest reasons is capital expenditures (capex), which is the basic cost of building a mine and its supporting infrastructure.
- There are lower grades being mined and more complex metallurgy.
- Companies are increasingly going into more remote areas that lack infrastructure.
- Environmental regulations are increasing.
- We are seeing more money-grabbing governments and resource nationalization. Miners are an easy target as mining is a long term investment and one that is especially capital intensive – mines are also immobile, so miners are at the mercy of the countries in which they operate. Outright seizure of assets happens using the twin excuses of historical injustice and environmental/contractual misdeeds. There is no compensation offered and no recourse.
Because everything you can imagine is working in a perfect storm to increase costs, and risks, on mining companies, here at aheadoftheherd.com we’re seeking out the smaller mines with low capital costs, uncomplicated metallurgy, no worry of governments seizing our asset and we’re looking in areas with long mining histories.