I can’t figure this out. Are investors betting on a world where:
China stops their central bank from buying gold?
China decides gold isn’t important anymore and gives up their massive holdings just for access to something like Facebook?
Gold mine owners won’t make any profits but tech companies can rake in cash tax-free forever?
Mining becomes too expensive because of costly equipment and super-high salaries for geologists, making gold mining unprofitable even with gold prices up 40% this year?
Finding gold becomes easy and mines get permitted quickly, but somehow gold still gets cheaper?
Existing mines get wiped out by new tech (maybe AI replacing geologists)?
Or is gold mining only profitable for the cleanup crews shutting everything down?
Mining companies are struggling because of inflation. Even big players like Newmont are having a tough time managing labor costs. The costs of running a mine are increasing faster than gold prices. An ounce of gold in the ground is worth less now than a few years ago. This will eventually turn around, but it might take 5-10 years if inflation continues. Personally, I just buy physical gold or something like PHYS.
Most mining projects aren’t profitable. Look at their press releases; you’ll see words like “could,” “may,” and “possible.” These companies stir up interest, start a project, lose money because the ore wasn’t rich enough, then move to the next project and repeat the cycle. The risk isn’t on the company; it’s on the investors. I fell for this with Electra Battery because they had government grants and were recycling EV metals. Then came a reverse split, and it all went downhill. Biggest loss I’ve ever had. Learned my lesson.
Kerr said: @Kim
The one I’m looking at is already growing over 20% and turning a profit. Plus, they’re opening another mine soon.
They all say that. Look at 50 mining stocks and compare their press releases—they all sound the same. Maybe one will hit, but the other 49 will burn you. Trust me, I’ve been there. If you’re investing in miners, be ready to get burned.
Kerr said: @Kai
Mining companies grow and bring in more gold. Gold bars just sit there. Plus, you can buy mining companies for less than their book value.
Mining isn’t always profitable. If gold costs $1,000 an ounce but the company spends $5,000 to mine it, who cares? If you’re into gold, just buy gold.
@Teegan
You’re ignoring the risks here. Mining stocks are like a lottery ticket. The companies often go bankrupt and leave shareholders with nothing. At least gold bars don’t have managers ruining them.
Kerr said: @Teegan
You have to be selective. It’s not easy, but the potential rewards are there.
Even experienced mining executives get it wrong. Do you really think you can do better than them? Without insider knowledge or a huge safety net, this will probably blow up in your face.
Kerr said: @Kai
Mining companies grow and bring in more gold. Gold bars just sit there. Plus, you can buy mining companies for less than their book value.
If you think gold’s up 40%, what kind of return do you need from your miner to justify the risk?
Commodity companies usually trade at lower multiples compared to high-growth tech companies. Historically, big returns from commodities come more from leverage than equity ownership. That might explain why these companies seem undervalued.
Junior gold miners are basically a gamble. They face massive costs, risky operations, and management teams that can be shady. Add in labor costs and expensive equipment, and it’s no surprise most of these companies struggle.