Rethinking Resource Investing

Ben Kramer-Miller, the chief analyst at miningWEALTH, discusses ways of investing in resource companies that go beyond the “explore-develop-produce” model.

by Ben Kramer-Miller
The Gold Report

My readers will notice that I often favor resource companies that have unconventional business models:

– Terraco Gold Corp. (TEN:TSX.V; TCEGF:OTCPK) (gold royalty)
– Medallion Resources Ltd. (MDL:TSX.V; MRD:FSE; MLLOF:OTCQX) (rare-earth processing from tailings (i.e., monazite sand))
– Great Lakes Graphite Inc. (GLK:TSX.V; GLKIF:OTCPK; 8GL:FSE) (graphite micronization and purification)

Meanwhile, most junior resource investors choose companies with more traditional “explore-develop-produce” models. There is little doubt that this model can work and that it can generate fortunes for early investors. However it is also a model that is high risk since it requires a lot of time and capital to develop.

There are cases where long-term investors made little to no money (or they lost money) despite the fact that the project in question is a success. A great example of this is Romarco Minerals. The Haile project is a high-quality multimillion-ounce deposit, but due to the amount of time and capital it took to prove this out Romarco Minerals had more than a billion shares outstanding. While most very early shareholders made money, it was not enough to justify the wait given the high risk of investing in junior resource companies.

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