Let me tell a story that illustrates why the small exploration companies are doing so well today - and why they can be such an unusually profitable investment.
It's a tale of two brothers. Let's call them David and Goliath. Both brothers are mineral explorers and equally talented. They both used to work for the same giant mining company - only brother David has quit and formed his own small firm.
One day, by pure coincidence, both brothers find themselves in Peru, looking at the same exploration site. Goliath is here on behalf of the mining giant for which he still works. David is here representing his own small outfit.
Being brothers, they greet one another, wander around together and even compare notes.
They both like the site a lot. What happens now?
Two very different things. Brother Goliath, who works for the big multinational, must first sell the concept to his company's Exploration Manager for Peru. Then they jointly must sell it to the Exploration Manager for Latin America. Then they all have to sell it to the Vice President of Exploration ... and everyone must sit down and sell it to the Board.
Brother David? He writes a check and starts drilling. And then, if the core samples come in looking great, he's got a home run. He and his shareholders sell their site to Goliath's company - and make a quick $30,000,000!
This is why the smartest geologists, engineers and exploring entrepreneurs are flocking to the "junior" companies. And it's why juniors can return such fat profits to their investors.
It's why junior exploration firms may well be today's most powerful "buy low, sell high" opportunity.
It's not just cheaper to look for gold now - it's also much easier to mine it.
Small mining companies are profiting from new developments in the science of extraction. Even companies that don't do any extraction themselves.
Here's why. Fifty years ago, everyone looked for high-grade, underground gold sulfide deposits. These are rich deposits - but very rare, very hard to find and very costly to exploit.
By contrast, gold oxide deposits are much easier to locate. And there are plenty of them around the globe. But in the old days of mining, no one knew how to extract the gold cost-effectively.
All this has changed following new advances in metallurgy. A revolutionary process called open-pit leaching makes it possible to extract gold from large oxide deposits.
It's changed everything! Suddenly, deposits that were simply ignored years ago can be mined highly profitably. And the trend is feeding on itself - because now that these deposits are profitable, explorers are going out and finding hundreds more!
This is happening also in copper. Increasingly, companies can produce copper from ore through a process called solvent extraction-electrowinning (SX-EW). Once again, oxide ores that weren't practical before are suddenly bonanza strikes ... and cheaper to work with as well.
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