Page 63 - Introduction to investing in Gold

The Beginner's Guide to Investing in Gold
Resources
Where is the deposit located? It may be in a different jurisdiction than where the company is listed. This should be no surprise to you, but some areas are safer than others. So, find out where the main deposits are.
Take a look at the work produced by the Fraser Institute – they produce an annual mining survey which ranks regions by “attractiveness”. As you can see, Northern Ireland, Western Australia, Quebec, Nevada, and Utah rank highly.
It’s really common sense. If you wouldn’t go there, why should anyone else? If you’re one of life’s adventure junkies, then I’d be cautious about investing in any region in the bottom half of the report. That’s not to say you shouldn’t, but there should be compelling reasons why you’re prepared to take on the extra risk.
What is the size of the largest deposit?
This is an area that confuses many investors. They hear that a miner has a decent resource of 1 million ounces and jump in. Only later they discover that this resource is over ten different deposits which are not close to one another – none being economical to mine.
It’s difficult to determine what is a large or small deposit because so many factors need to be accounted for. But as a rule of thumb, if the miner has proven that the deposit is “open in all directions” – which means that drilling has indicated there could be more gold both laterally and at depth – then you may be prepared to run with a smaller deposit.
As a very rough guide, if a miner can prove there are at least 400,000 ounces of economic gold in a deposit (this is an arbitrary number), there is a reasonable chance they’ll get financing for a project if the grade is good (especially if the deposit is open in at least one direction).
I should add that I have quite a high appetite for risk. If you have a lower appetite, you might want to consider a higher threshold (so a larger deposit). Similarly, if you’ve got a higher appetite, you may opt for a smaller-size deposit in the hope they find something larger.
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