Junior Mining Companies

Investing in the "juniors", the small companies which are formed to explore for mineral deposits, it is much more speculative than investing in larger companies. Junior exploration companies, as well as other venture capital companies like small high-technology firms and junior oil explorers, offer high returns if they are successful. The other side of the same coin is the higher risk that they will fail.

One very sensible rule is never to invest money you cannot afford to lose. Understand that the junior exploration game is a gamble, and keep the rent money out of it. The buy-low/sell-high bromide means more here than anywhere else in the market for once the stock's price is up and everybody is talking about a great mining play at Dead Cat Falls, the money has already been made.

Jumping from one stock to another only makes money for your broker. Choosing a good investment and staying with it is a much better strategy. One way of choosing that stock is to look at its people. If they have a record of making projects prosper, it is a very good sign that they are talented and diligent.

Be careful with promotions. In particular, never buy a stock from a dealer who calls you up unexpectedly – you haven't had time to investígate the company's assets or management. People who are in high-pressure investment sales are still around. Dealing with them will cost you a lot of money.

Be extremely cautious of information from Internet chat rooms and bulletin boards. Some of the people posting bullish statements are long on the stock, while some of the negative messages may come from professional short-sellers. The exchange of points of view may be entertaining, but they should not be depended upon to make firm investment decisions.

Remember, too, that there is little or no regulatory oversighight of newsletter writers, and many of them hold positions in the stocks that they recommend. While some newsletters give us quality information, others are entirely promotional. Stick with experienced, respected newsletter writers and avoid the rest.

If you have a chance to invest in a prospecting syndicate, keep in mind that these investment rules are comparable to those for investing in junior exploration companies. Only invest what you can afford to lose. Keep in mind that prospecting is a gamble. Consider the management carefully; is there a prospector or mining man with experience who can pilot the venture successfully?

Remember that the success of a prospecting venture depends on getting an exploration or mining company interested in the property. This is much easier to accomplish during good times; companies will never have money to burn, but they are more likely to have money and manpower to commit to a good-quality prospect when they themselves are making money.