Page 56 - Introduction to investing in Gold

All mining stocks are different. There are literally hundreds of them, and you need to be crystal clear about what you may be investing in. Broadly speaking, you should think about three things:
1.Is the mining company already producing, or is it an explorer or developer? By definition, explorers and developers are riskier (and are often referred to as Junior Miners) because they spend rather than generate cash. I would view pure explorers and developers as Junior Mining companies.
2.What are they producing or exploring for? Obviously, you only want to buy into a company that’s involved in a commodity you like. For example, if you like gold, you need to make sure that’s what they are looking for. Junior Miners is a broad category, so they could be exploring for something else.
3.Where are they operating? Because of political risk, you need to have a long hard think about where you want to invest. For example, although the company may be listed in Canada or Australia, its assets could well be somewhere else (e.g., South Africa). You need to know where they are and be comfortable with that jurisdiction before making any investment.
Why Do I Like the Junior Miners?
They are looking for something tangible, such as gold, which is considered valuable anywhere in the world.
There is evidence that they’re looking in the right place (an operating or previously operating mine may be nearby). Some can demonstrate that they’ve already found some gold from earlier exploration.
If they make a big discovery, the uplift in the share price can change your life.
As I said earlier, one of the companies I invested in was called Chalice
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