Five years ago, gold prices surged to record highs, and investors piled in. Those who invested in bullion did well, and those who set their sights on junior miners did even better.
Today, gold is performing even better than it did five years ago, which means investors looking to capitalize on the gold cycle ahead should take a few lessons from history’s playbook.
The upside that smaller mining companies, known as junior miners, can offer is second to none. Investors should have some appetite for risk, though, as junior miners can be more volatile than larger gold miners. This shouldn’t be too surprising to seasoned investors.
The Multi-Asset Explorer ROI
Juniors known as multi-asset explorers tend to perform well in this environment.
Multi-asset explorers hold several projects in their portfolio, while single-asset explorers hold just one, which is why they can be seen as “high risk, high reward.” The combined benefit of a multi-asset strategy is that risk is spread out, and there are more chances for a discovery. It comes down to capital. Most juniors do not have enough capital to establish a portfolio of assets, and so it’s worth it to take a look at the ones that do.
Axcap Ventures is a good example.
Axcap Ventures is a multi-asset explorer holding a basket of gold assets. Its three projects are spread throughout the US and Canada, two of the safest mining jurisdictions in the world. They’ve consolidated gold assets that they believe have been overlooked and constrained, not by their geology but by limited drilling.
Although there is much work to be done, early results from their summer drilling program at their Converse project in Nevada indicate they could be on the right track.
Before moving on, it’s worth noting that what’s special about Converse is that it holds the second-largest gold deposit in Nevada not owned by a major. What’s more, Nevada accounts for more than 75% of the gold produced in the US. These factors prime Axcap and other companies like it in several ways. Here’s why.
Value Creation Takes Place at the Junior Level
Value creation for the mining industry at large happens at the exploration level. So, if a junior miner makes a discovery, it could significantly increase its value. For a larger company, it may not even move the financial needle. This means true upside comes from investing in a junior that makes a discovery.
Secondly, gold mines have a finite lifespan, and as they are mined, reserves are depleted. This means majors will need to find new deposits to mine or risk declining production and long-term viability.
Either they’ll search for a new deposit, which takes time, or they can take an easier route and buy a junior mining company. The latter is less risky, and when junior mining companies are taken over, their stock prices tend to rally, which benefits investors.
As long as credit keeps flowing through the economy and the gold price remains robust, which is what we’re seeing in the current environment, junior miners and, specifically, multi-asset explorers are better bets.
