There is no question that precious metals along with gold and silver mining stocks are clearly out of favor with investors. Most of these stocks are 50, 70, even 85% since the 2011 top. It has been a painful ride to the bottom for those who invest with the buy, hold and hope strategy.
The good news is that I see light at the end of the tunnel, meaning gold, silver and miners are showing serious signs of bottoming. While the fundamentals have been bullish on metals for years which is a positive, we also know that fundamentals don’t really play into immediate price action of any specific asset when it comes to trying to time a market.
But the level of M&A (mergers and acquisitions in sector) along with technical analysis are now showing signs that intelligent gold and silver investors are accumulating specific companies and exploration properties at rock bottom prices in anticipation of the next bull market in silver and the price of gold.
At this stage of the game the shotgun approach for owning mining stocks will not work well. If you want the best bang for your buck you need to get specific companies which have true potential of making money.
The Sweet Spots:
Savvy investors have been flocking to two types of mining stocks recently accumulating positions in anticipation of some big events.
These two business opportunity types are:
1. Exploration companies with proven properties containing a sizable amount of valuable resources.
2. Mines starting production.
What do both of these types of stocks have in common that make them attractive?
They both are one event away from generating big value to its shareholders. This proven resource rich properties will either be acquired by a larger firm. This type of event can provide returns of up to 10x ROI on the share price in a blink of an eye in some cases.
Or these resource rich exploration stocks decide to go into production for themselves and provide potentially even more value long term for its shareholders much like what CMC Metals Corp. (TSX.V: CMB) is doing.
I’m not going to reinvent the wheel here in talking about what CMC Metals Corp. does and the stage that it’s at.
Concluding Thoughts:
It has been years since I have been excited about precious metals and mining stocks.
While I still believe metals and miners will struggle as a sector. It is clear that there are some amazing opportunities available for those who know what to look for, and have the guts to step forward when most investors are stepping back.
The markets go in cycles also known as of expansion and contraction in price and sentiment. Assets classes which are most out of favor eventually become the next market darling. But before that can happen the asset class/sector must be completely out of favor and hated by most… which gold miners are.
Recently I met with the president of the company in Toronto to learn more about its financials, management and project. I now personally own share of CMC Metals Corp. with an average price of 6 cents and I plan to hold these shares for a long time until I think the next gold bull market is almost over.