Special Report: Investing in Junior Mining Stocks

Mining stocks are extremely volatile, so it isn’t always a pretty picture when metals are not in a bull market.

Junior mining companies — smaller companies that explore new mines for new deposits — are even more volatile. Of course, if they do strike gold, they can be incredibly profitable.

Not to mention, the opportunity that some of these companies have allows them to stand out above the competition. 

I generally consider myself a conservative investor. I recommend a well-diversified portfolio for the majority of your financial assets. But it’s not a bad idea to have some speculative plays in your portfolio to give yourself an opportunity for huge gains.

This is where junior mining stocks come in. They are certainly not the safest of plays, but they offer the best potential reward without being completely reckless.

If I wanted to offer investments for safety, I wouldn’t even consider mentioning the mining sector, let alone the junior mining sector. So know these stocks are highly risky, but with a high potential reward.

With these plays, you should only invest money you can afford to lose. Of course, sometimes you have to swing for the fences.

That said, here are my top five junior miners.

Pilot Gold (OTC: PLGTF) (TSX: PLG)

Pilot Gold is a Canadian-based company that is still in the exploration stage.

It has acquired new exploration sites in eastern Nevada and is also working on projects in Turkey, which certainly is far from risk-free — but Turkey is actually one of the better places to do business in the Middle East.

Pilot Gold still has over $23 million sitting in the bank to put towards exploration and is continuing to work on Kinsley Mountain in Nevada.

This stock opened in 2011 at $4 per share. As of this writing, it is trading at $0.73 per share. It is a penny stock, and the volume is not high, which can make trading more difficult. But this is one of those stocks you should consider for a huge profit opportunity.

If a stock goes down 100%, then you will only lose what you put into it. But the upside is unlimited.

Consider Pilot Gold as a true penny stock for your speculative portfolio. The company’s extra cash and short-term investments should give it some time and ability to make new discoveries while giving you the opportunity for big gains.

Rio Alto Mining (TSX: RIO)

Rio Alto Mining also trades on a Canadian exchange. It is a more established company with higher volume.

The company has exploration activities for gold oxide, copper and gold sulphide, copper, and silver. Its primary business is in Latin America, with a big interest in Lima, Peru.

It reached about $6 per share in 2012 and is currently trading just under $3 per share. This one is slightly less risky than Pilot Gold. The upside is probably also less than with Pilot Gold, but there is still potential for 1,000% gains, and you will stay in the game longer with this stock if metals continue to struggle.

Silver Standard Resources (NASDAQ: SSRI)

Silver Standard is currently one of my favorite speculations to recommend. The stock price went up to about $45 per share in 2008 before going on a roller coaster ride — falling below $10 and then going back up to about $35 in 2011.

The stock is now trading in the single digits and has been as low as $4 per share. As of this writing, it is trading between $5 and $6, but that can change quickly.

This stock has incredibly volatile swings, which, in my opinion, actually make it attractive. This is a speculative investment, so we want to have strong upside potential — and you sure have it with Silver Standard.

Silver Standard’s exploration is primarily for silver, zinc, gold, and lead deposits. The company has mining operations in Mexico, Argentina, and Peru, but it maintains its headquarters in Canada.

In terms of geopolitical risk, it is actually a safe stock. I get a lot more nervous when a company’s main operations are in a third-world country with little respect for property rights.

If you can pick up this stock for around $5, then a new bull market in gold and silver could send this thing to the moon. It could easily go up ten-fold or more, so this stock may warrant a small piece of your speculative portfolio.

B2Gold (NYSE: BTG)

B2Gold explores primarily for gold, silver, and copper. It has exploration activities in Nicaragua, the Philippines, Namibia, Burkina Faso, and Columbia. This obviously presents more geopolitical risk, particularly for the mines in Africa, but the company’s best hopes are probably in Nicaragua.

It is currently trading just under $1.80 per share, but again, this can change quickly. It has traded above $4 per share, but believe it or not, this stock is less volatile than other junior mining stocks.

This is a well-established company, but the trading volume is not that high. (In comparison to Pilot Gold, however, B2Gold has high volume.) It is traded on the New York Stock Exchange, and there should be no problem getting it traded on normal days.

This is a relatively safer junior mining stock to own. Its exploration activities are widespread, so it is a bit more diversified, and it has a good chance of striking gold in at least one of its operations.

Junior Gold Miners ETF (NYSE: GDXJ)

I am cheating a bit on this one, as it is an exchange-traded fund, not a stock. But I would be remiss not to mention it.

This ETF consists of mostly junior mining stocks, currently with over 60 holdings. You are not putting all of your eggs in one basket with this play.

It is a broader play on precious metals and mining stocks in general. Even though it is well diversified in terms of the number of companies it holds, GDXJ still specializes in junior miners, which is a highly volatile sector. So there is certainly still a high amount of risk associated with this ETF.

However, if we hit a new bull market in the metals, then you are almost sure to make significant money with this investment. An individual company, on the other hand, could still fail to see success in its activities even if metal prices go up.

If we enter a new bull market in gold and silver, then GDXJ should do very well. You still won’t have as much upside as with an individual mining stock, but it is a better long-term hold in your speculative portfolio and will still give you the potential for huge gains.

GDXJ is traded just like a regular stock, and the volume is very high, making it easy to trade. You could consider adding this to your portfolio along with one of the suggestions offered above.

You will be thankful when mining stocks start recovering from the previous few years as you set yourself up for some huge gains.


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