Why Invest?
News and Media
Why Junior Gold Miners?
When investors seek more aggressive exposure to the price of gold, they
will often purchase shares in junior mining (or mid-tier) companies. These
are companies that are either exploring for gold or in some stage of the
commercial production process.
Junior gold miners provide the possibility of significant upside leverage to
the price of gold. For example, if gold is selling at $1000/oz and the cost of
underground production is $500/oz, there is upside leverage of $500/oz.
Surface gold or open pit gold can lower production costs to as little as
$100 to $300 per oz., thereby increasing the possibility of upside leverage.
What makes these scenarios attractive is that even if the price of gold
were to decline, the potential for upside leverage still remains.
There are an estimated 3000 junior mining companies in various stages of
development. These include:
•
exploration
•
developmental
•
proven reserves
•
near-term production
•
commercial production
The challenges faced by junior gold miners can include:
•
no access to investment capital
•
no geological support to target additional exploration
•
no drilling support to confirm additional discoveries
•
no expertise in permitting, bonding, legal and accounting issues
•
no ability to take their project into commercial production
Sifting through and analyzing some 3000 junior mining companies in
various stages of the development process can be a daunting task.
Circumstances can change quickly. Risks can run high. But so can the
rewards. If a junior mining company has strong management, solid
financing and a significant number of mineable and proven reserves, its
potential for success dramatically increases.
Because junior gold miners start out with substantially lower market caps
than major gold miners, and because significant risk is often factored into
their share price, their first major discovery or the achievement of
commercial production can multiply their share price.
A junior miner whose share price doubles is said to be a “two bagger”. If
the share price increases five-fold it is called a “five bagger”. If the share
price increases ten-fold it is called a “ten bagger”. Very few junior miners
ever achieve this mutiplier effect because of the risks associated with the
mining sector in general, and junior miners in particular. Less than 5% of
all junior miners will ever achieve commercial production.
For those junior gold miners who achieve commercial production, the
rewards can be substantial. If a junior miner reaches 50,000 oz/yr of
commercial production they are considered to be a mid-tier producer.
There are an estimated 50 mid-tier producers. When a company reaches 1
million oz. of commercial production each year they are considered to be a
major producer. There are approximately 20 major producers.
With junior mining companies, circumstances can change quickly. Risks
can run high. Due-diligence is the key to success.
Copyright © 2010 Golden Phoenix Minerals, Inc. | Terms of Use | Privacy Policy | Safe Harbor Statement | Contact
Projects
Leadership
Royalty Mining
Company
News & Media
Why Invest?
Mineral Ridge
Management
Market Opportunity
Company Snapshot
Join Email List
Why Gold?
Ashdown Mine
Board of Directors
Royalty Mining Advantage
Mission Statement
Press Releases
Why Gold Miners?
Adams Mine
Technical Advisory
24 Month Acquisition Plan
Code of Ethics
Conference Calls
Why Junior Gold Miners?
Northern Champion
Committees
Growing Team of Experts
SEC Filings
Company Videos
Why Golden Phoenix?
Upcoming Events
Download Golden Phoenix’s
PowerPoint Presentation
8/16/10 (PDF)
