“A Golden Mulligan” – November 2011
A recent circular from Tocqueville Asset Management LP makes some excellent points. It explains that gold shares are relatively cheap at the present time and offer advantages over investment in gold. In particular dividends in some cases, organic growth through exploration, increases in production and the possibility of takeover bids.
The paragraph that I find most interesting is about junior gold mining shares, which reads as follows ‘The most efficient exposure to such returns is to invest in early stage or small cap companies where entrepreneurial success in discovering new, economically significant precious metals deposits, or in developing new deposits into cash flow producing mines can yield quantum increments in per share valuation.’ It is for this reason that my family trust has made a large investment in Junior Gold.
The other very interesting feature is the chart showing ‘Life Cycle of a Gold Mining Stock’. The three phrases are Discovery followed by Development and then Production. It is clear from this that Development is usually the most profitable phase and is one of the reasons I have invested substantially in Spanish Mountain Gold.
Ian Watson
Please click on the title below to read the article:
See also ‘The US Problem Explained!’.