Gold: Paper or the Real Deal? (Part 2)
In this post I'll be talking about two other types of "paper" gold...mining and gold stocks, and/or part ownership. I'll also be throwing a few tips your way about buying and selling gold, especially the placer gold you've recovered over time. So let's get started.
Although it's true that only major mining corporations tend to be listed on the big stock exchanges, there are still plenty of other commercial gold mining ventures that you can throw your money at these days. One group of very small mining ventures that can be invested in is known by the name of "Junior Miners" or "Junior Mining." Although there are some very earnest and capable small mining ventures out there these days, gold mining is very risky business as most of you already know. Sometimes you eat the "golden" bear but most of the time the bear eats you. Extrapolate your own small-scale activities or experiences into a larger, more costly mining framework and you'll get a pretty good idea of what's what when it comes to many commercial gold mining ventures, including Junior Miners.
Still Not the Real Deal
The whole idea behind investing in stocks is to provide working and expansion capital for various corporations and companies, or simply to ride the coat tails of a known and proven company and hope that your stocks will increase in value over time and/or pay good dividends. With a company like Microsoft or perhaps Starbucks your stocks will generally increase over time or remain solid from an investment standpoint, but even with major corporations like these there is NO guarantee. None. Should the stock market crash or take a nosedive your stock shares will do the same. If you bought that paper at very low values you'll probably be OK, but if you paid dearly for them you're gonna take it in the shorts and suffer some substantial losses. But hey, you know all this. I'm simply setting the stage for the idea of buying mining stock shares here. And my advice in that matter is DON'T! Remember, what you're buying is "paper" or digital gold again...not the real deal. Mining ventures, especially those oriented toward gold mining, are extremely risky and speculative for the most part and often go bust or end up taking annual losses. Some mining companies take more losses annually than the gold they produce and have worked out devious ways to manipulate those losses via tax codes, write offs, and government subsidies in certain countries. It's like a magic act...they claim losses but actually pull a profit rabbit out of the hat. But chances are you won't get much of that rabbit. Want to throw your hard-earned money at a magician? I didn't think so.
Hole in the Ground
Am I saying this to slam all the hard-working and earnest Junior Miners out there, or the commercial ventures that really want to make a go of it? Hell no. As a gold miner my allegiance is mainly to other gold miners, big or small. But that tip of the hat or allegiance doesn't mean I'll necessarily throw my life savings their way. Even at big mining corporations like Newmont or Rio Tinto or Barrick, who have their hands in lots of other non-gold mining operations and are wayyyyyy more solvent than most Junior Miners or "mom and pop" commercial mining operations. You see, as a long-time gold miner I have a pretty good idea of what it takes on a micro scale to turn a profit mining. So it doesn't take much for me to, in turn, to project that knowledge and experience onto a larger movie screen. As Mark Twain once said, "A gold mine is a hole in the ground with a liar standing on top of it." (And no, I'm not suggesting all gold miners are liars...though I've known a few in my time!) So should you buy "paper" gold that will supposedly increase your wealth from a hole in the ground? I won't, but if you have some extra money on hand (what I call "mad money") and want to roll the dice that's OK. It's your call. Just remember that mining stocks and the "paper" gold they represent are not necessarily the best investments out there. They are highly speculative. And the smaller they are, the more speculative and risky they become. If you have money to burn and are thinking of trading gold stock shares, why not take that money and buy bullion from a local coin shop or dealer? Sure, you'll pay a bit over spot price for that shiny metal, but at least you'll have it snug and secure in your hot little hands.
On the Level or Not...
Now the next part of all this hoopla I'm throwing your way has to do with buying into gold mines, mining ventures, or any other "hole in the ground." I can tell you this...I've been approached numerous times over the years to throw my money into someone's else gold mine or mining venture. In fact, too many times to count over the space of my 40 years as a small-scale guy. Now some of these "invitations" were solid and some were not. But it doesn't take a genius to understand that scams abound in this sort of "offer." Sometimes these folks only wanted a few thousand dollars to get going with the promise that I'd get my money back three-fold or ten-fold or however many "folds" you want to put that dollar bill into. The high-risk types or scammers wanted a lot more money than that from me, but with more grandiose promises of how much "gold" I'd get back for my "investment." In the decade since I've been writing and publishing this blog those "offers" have increased, with many coming from China, South America, Africa, or good ol' Timbuktu. Can you say "scam?" Whether on the level or not, I have declined any and all offers to throw my folding green anyone's way in this regard. After all, I can dig my own "hole in the ground." And so can you...
Which brings me to the following point. Be wary of certain "mining" companies or partnerships (big and small) online offering to take your money via credit card, PayPal, or Patreon so that you can get in on their "action" which is often nothing more than visual sleight-of-hand on YouTube, for example. I'm not naming names here for obvious reasons (I got tired of receiving "cease and desist" paperwork from various attorneys representing questionable "clients"), but a joker or pair of jokers who are pulling nuggets pan after pan in some small creek in Never-Never Land without settling down to work that same creek are suspect. Hell's bells folks. "Salting" the works has been around since the first liar out there decided to get someone else to contribute shekels to his or her "hole in the ground." Ever wonder how these YouTube gold "stars" consistently come up with super-rich ore or nuggets and pan fulls of gold time and time again? Are they better miners than you? Maybe, maybe not. Are they smarter than you? Maybe...especially if you're giving them money. All-in-all these hustlers give a bad name to all those earnest folks on YouTube trying to show others what they love to do and are hoping to turn a buck or two from the great god Google.
Well, I rambled on so much in this post I'll have to write up another one to cover those tips I said I was gonna give you in the introductory paragraph. I'll definitely do that, so hang in there.
And remember, a golden bird in hand is worth two out there in the bush.
(c) Jim Rocha 2018
Questions? E-mail me at firstname.lastname@example.org