Gold mining shares can be broken down into four categories: majors, mid-tiers and junior gold producers and the gold exploration companies. To find out which category of gold mining shares I am invested in the most, you can read the note at the bottom of this page.
As the ‘juniors’ also refer to a category within the mineral resource stocks, it is important to be aware of what exactly is being described!
4 Gold Mining Shares Categories |
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| Category |
Annual Production |
Description | |||||
| Majors |
> 1.000.000 |
The biggest gold miners are called the majors. The main focus of the majors is to increase or maintain their depleting reserves. Often they realise this by acquiring the mid-tiers and juniors. Investing in major gold producers is believing in a further appreciation of the gold price from the current level. |
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| Mid-Tiers |
200.000 – 1.000.000 |
Management of the mid-tiers often want to grow the company in order to become a major. Often they attempt to achieve this by acquiring other mid-tiers or juniors. Mid-tier gold producers provide more leverage to an appreciating gold price than majors. |
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| Juniors |
< 200.000 |
The smallest gold miners are called the juniors. Investors should realise that juniors often have to raise capital to expand their production or to fund their exploration activities. The junior gold producers give the most leverage from all the gold producers to an appreciating gold price. |
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| Exploration Companies |
–
|
Gold stocks with no production are called gold exploration companies. Exploration companies often turn to the capital market in order to raise the funds necessary for their exploration activity. Even if they don’t find the next big gold project, an investment in an exploration company can be extremely profitable. Of course the risks within this category of gold mining shares is the biggest. |
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Note: My stock portfolio of gold mining shares is mainly concentrated in the mid-tiers and junior gold producers. The reason for this, is that I believe that when the gold price rises further, these categories will generate the most free cash flow in relation to their current market cap. As a consequence, I expect the share prices of these stocks to rise the most.
Next to these two categories of gold mining stocks, I feel myself also comfortable investing in those gold exploration stocks which have a huge amount of cash on their balance sheet. In addition, these exploration companies should already own a very promising project on which a resource report has been established according to the CRIRSCO standards.
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