Undervalued Precious Metals Stocks
Investing in undervalued precious metals mining and exploration companies during the current bull market can potentially provide significant leverage to rising precious metals prices. However, there are important considerations to make before beginning to invest:
With the exception of top-tier mining and royalty companies, most small-cap precious metals stocks tend to be highly volatile, affording investors the opportunity to make or lose considerable sums within a short period of time. Therefore, risk-adverse investors should take caution. When precious metals market prices climb, undervalued junior stocks generally climb higher, but when metals prices tumble, junior stock losses can be especially pronounced.
There are hundreds of publicly-traded precious metals mining companies that are debt-ridden and/or uprofitable, and countless exploration companies with growing long-term debt, no valuable assets and no evidence of significant resources worth pursuing. Less than half of all mining companies are profitable, and only 1 in 10,000 new exploration projects actually moves to the mine development stage. Thus, if you are going to invest in this sector, it is essential that you find companies with projects that currently deliver or will deliver real value to their shareholders. Unfortunately it takes time and effort to sift through the myriad financial reports and strategies of companies, but it's a necessary step in the process.
Before loading up on shares of major mining companies or popular junior explorers, remember that not all precious metals stocks are equal. Some considerably outperform precious metals prices, while others often underperform.
It can be difficult to project the future for both mining and exploration companies for numerous reasons. First, precious metals market prices generally guide the direction of share prices, and at least on a short-term basis, it can be difficult to determine how precious metals prices will behave. Second, geopolitical events can adversely affect prices on a whim.