Gold continues to be hot this year and junior gold miners are reaping the rewards as analysts bring light to the various investment opportunities that provide access to the companies extracting gold from the earth.
Interest is increasing towards allocating to gold in the current market environment. As such, the capital appreciation and diversification potential of small- and mid-cap gold and exploratory gold miners can’t be ignored. Many industry experts view Canadian gold miners as the best option for providing investors with cost-efficient and pure exposure to this market segment by implementing production and revenue tests that other gold stock ETFs might lack.
Buying gold stocks and silver stocks has picked up in recent months as investor are looking for the simplest possible way to diversify their portfolio focused on junior gold mining stocks. In addition to having ownership in lucrative development projects, junior miners are attractive because their diversified mining stocks expose investors to potentially earning dividends.
ETFs that hold a selection of the best gold stocks and best silver stocks like the SPDR Gold Shares, have registered significant gains as ETFs generally track the price of gold. However, there is an annual fee for holding the investors’ funds.
Another viable option is to buy gold stocks or mining stocks from gold and silver exploration and production companies. While junior miners generally have fewer reserves in the ground, their structure allows them to be more versatile and the potential for a new find marks expected growth in cash flow. They also have little or no debt, and competent management teams.
Some of the best mining stocks to buy right now include Spanish Mountain Gold (CVE: SPA) with resources located in central British Columbia, Canada, one of the most politically safe, mining-friendly jurisdictions. The firm reports to have a Canadian resource of around four million ounces of gold. It expects this deposit to support a mine with annual production in the range of 200,000 ounces and a mine life in excess of ten years.
Norseman Gold (LSE: NGL) is a foreign junior miner who has Australia's longest operating mine, with 19 million ounces produced so far. It is also debt free with very strong cash flow. Its mill is currently working at 60% of capacity. However, with the company planning to bring two new mines into production, there is a strong possibility of a reduction in cash costs. Norseman Gold currently trades at about 7.5 times 2010-2011 cash flow, against 20 times for its peer group.