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Successful investing in penny gold stocks can produce returns that many people think impossible and few people will ever experience. However, it’s not as simple as throwing darts. While a bull market in precious metals helps, there’s no replacement for talented management. Moreover, in an environment of failing fiat currencies, there are unique ways to safeguard against monetary depreciation and amplify returns.
Penny Gold Stocks – Starting At The Beginning
Talented management is one of the most important ingredients of the best penny gold stocks. Experienced people at the helm can really up the odds of an explorations company making the eventual discovery. And discovery is what takes the stock from the point where you invested to the place of extreme profit. It’s not uncommon for industry leaders to build successful companies and then begin new projects. This is where opportunity lies, as distinct from rather bullion-based investments like the Public Bank Gold Investment.
Penny Gold Stocks And Exploration Stories You’re Proud To Be A Part Of
The process of discovery for penny gold stocks can even sometimes seem like a fairy tale. For instance, Robert Quartermain of Silver Standard Resources fame was once with Esperanza Silver. Esperanza Silver was on the Toronto Venture Exchange, with Mr. Quartermain as a director. Esperanza was looking for silver and other valuable minerals both in Mexico and South America (Bolivia and Peru). Brilliant leadership puts together brilliant deals. In the beginning, Esperanza was a tiny company, selling for less than fifty cents and having a market cap of only around thirteen million dollars.
Esperanza aligned with Silver Standard to explore for silver in Peru. Having poured through old records and decades-old data, the company sought to look closer in a given area. They literally loaded the donkeys and relied on locals to lead them from camp to the precise picking grounds. Geologists found promising quartz rocks and, pleased with them, the locals chimed in. Believe it or not, it was the local people who led them to a canyon with mass quantities of quartz. Assays showed respectable amounts of gold. This led Esperanza to secure the mining rights.
Penny Gold Stocks And Why They Don’t All Have To Be Winners
Obviously not all penny gold stocks turn out this way. But the point is that it happens on a regular basis. Our opportunity is in identifying the most promising of these start-up companies and showing up before the party begins. If we had been an early player with Argentina Gold, we’d have benefitted when Homestake Gold bought the company for 270 million dollars. Barrick Gold bought Sutton Resources for 493 million dollars. Glamis Gold picked up Francisco Gold for $284 million. Household name Goldcorp paid $444 million for Virginia Gold. Barrick Gold Again stepped up to the plate, paying $940 million for Arequipa. Inco purchased Diamond Fields in a mind-numbing deal worth approximately two billion dollars. As you can see, opportunity abounds! A gold ETF, by contrast, would average down the effects of such a play, so well-picked individual companies offer the greatest opportunities.
Penny Gold Stocks Offering The Incidental Currency Diversification Benefit
Apart from massive leverage, these investments offer another very important feature. If you access the foreign exchanges, you can purchase these Canadian companies directly on the Canadian exchange. Most importantly, you can have an account denominated in Canadian dollars. It will be important to check with your brokerage and ensure that you are actually trading in Canadian dollars and no just accessing the Canadian exchange while still denominated in U.S. Dollars.
The reason for this is simple. The U.S. Dollar has been dying a slow death for some time. More recently other key countries around the world have openly shown skepticism about the Dollar as the world’s reserve currency. Not surprisingly, the value of the Dollar has tanked. Thus, true diversification is not achieved by simply owning a Canadian company. You must be diversified out of the Dollar as well. With all that the Canadian resource stocks have to offer, diversifying into the Canadian dollar in this context simply makes sense.
The power in having owned penny gold stocks in Canadian dollars, versus U.S. Dollars, is that you could have made about 40% or better on your money, even if the stocks themselves were completely flat. To illustrate, note that it only took sixty-some cents to buy a Canadian dollar back in 2003. Today, the two dollars are approaching complete parity. When you factor in the rise in share price of the underlying stock, you can see how your returns have been amplified. Put differently; if you owned these companies as Dollar-denominated assets, your actual, real-world return are significantly lower than what appears on paper. This is an inevitability with penny gold stocks that arises from the drop in the Dollar’s value.
