StockGuru Canada

Ten Tips on Selecting Mining Stocks

1. The management of the mine is essential to success of the mine.  Look for professionals with 20 or more years of mining experience.
    
2. Look for large deposits of resources.  For gold, look for at least 2-3 million ounces.  For silver look for at least 100 million ounces.
    
3. Only reserves are proven mineable ounces  proven by engineering and government rules; resources still have a long way to be economically feasible.  “Measured” and “indicated” resources are reliable, but “inferred” is speculative.
    
4. Look for high grade potential.  
    
5. Mining companies with the potential to expand will increase that company’s intrinsic value.  This potential is based on finding and confirming more and more resources.
6. Low cost per ounce of production will give the companies more cash flow to expand and buy new properties.
    
7. Compare the market capitalization per ounce of different mining companies.  The per ounce value of resources should be much less than the per ounce value of reserves as there is still a lot of costs to turn the resources into reserves.
    
8. If the mine is already a producer, look at the cash flow per share.  Smaller mining companies can sell for 25-35 times current cash flow. Future revenues are usually computed at net present value.
    
9. Use comparable to determine not the mining company you are investing in is not overprices.  Compare companies for: grades, tonnage, cost per ounce, reserve/resource value per dollar invested, market cap per reserve/resource ounce, discounted cash flows, net present value of mining assets.
    
10. In a favorable mining environment, due your research but take some risks.