Page 67 - Introduction to investing in Gold

The Beginner's Guide to Investing in Gold
Secondly, if they do have a deposit, how many directions is it open in? For example, sometimes a deposit is said to be “open in all directions” – which is north, south, east, west and at depth – so they could expand it in any direction. In other situations, they may have determined that there is no more gold in one or more direction(s), so there is clearly less potential.
As I’ve mentioned earlier, the deposits are then aggregated to arrive at a resource. So don’t be fooled by that. For example, it may be better to have a resource of 700,000 from two deposits rather than a resource of 900,000 from ten deposits. Don’t fall for the “headline number”.
Thirdly, exploration costs money. Although, in theory, there could be a lot of potential to explore for more gold, do they have the money to do it? If they’re a pure explorer (with no production), they will probably have to raise capital through the issuance of more shares (diluting existing shareholders). Is the management highly credible, and is the project exciting enough to attract this capital?
This brings me to another point. If they’re a producer and are exploring close to their existing processing facility, they may be able to process any potential gold that they discover without the large capital expenditure requirement of building a new plant. So, it’s also important to look at where they’re exploring relative to their existing assets.
Bonus Factors
That’s my B.R.I.D.G.E. system. I put all my mining companies through that before deciding what to do. But being an experienced investor, I like to dig a little deeper, so here are two other aspects worth considering.
Management
Like all companies, good management is important. Not just to ensure the operation runs smoothly but also to make sure the company operates in the best interest of shareholders. Again, it’s incredibly difficult to generalise, but here are a few things to think about:
Have they got a good track record of running a mining company? Where were they before?
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