Every so often, your friendly Gold Enthusiast gets an email asking a question such as, “How do I evaluate junior gold miners?”
In case you’ve been living under a rock the last 50 years, junior gold miners are smaller-than-huge companies that typically have one to four mining and/or exploration projects going at any one time. They’re called “junior” because they are small compared to the big companies in the sector, like Barrick Gold (NYSE:ABX) or Royal Gold (NYSE: RGLD). They might someday grow up into a big mining company, but for now they’re relatively small sized.
Over the years there are many great stories about the widow who invested all her life savings in one of these companies, and ended up wealthy thanks to a buyout or a sudden spike in gold prices. What’s talked about in less-lilty tones is that junior gold miners can also drop like a rock, if a vein runs out or the firm hits a streak of bad luck.
Photo: “Gold and quartz (Main Ledge, 3050 Level, Homestake Mine, Lead, Black Hills, South Dakota, USA) 1” by James St. John is licensed under CC BY