We are now very close to the time when savvy investors should start backing up the truck …
loading up on precious metals (especially select mining stocks) at bargain-basement prices … and positioning for what I believe will be a massive payoff in the years ahead.
I’m sure I don’t need to make the case why you should invest in precious metals. You already know the merits full well. But allow me to briefly recap where we are now in the gold cycle, and the lucrative profit opportunity that’s just ahead.
Since its interim peak in 2011, gold has finally broken out of a nearly five-year-long downtrend …
It’s critically important that you understand the context here: Gold started its long-term secular bull-market megatrend back in the year 2000. It reached an intermediate peak at $1,923.70 per ounce. The downtrend that ensued was merely a cyclical bear market. And the secular bull market remains entirely intact!
In the second chart, you can see that mining stocks have likewise broken out of a long cyclical downtrend into a bull market. I’ve been waiting patiently for the first significant pullback off the initial rally in 2016 … and now we’ve got it.
Both gold bullion and gold shares have come down somewhat since their mid-2016 peaks. But while bullion is only down 5%, gold miners, as measured by the PHLX Gold & Silver Index (XAU), are down nearly 25%.
This makes mining shares a better bargain right now than physical gold.
And judging by the rising economic and geopolitical stress we’re seeing in the world today, we could be just at the beginning of the next meteoric rise in both bullion and shares.
That’s because gold is the ultimate crisis investment. And as you may know from the forecasts of our Edelson Institute experts, the most powerful cycles in the financial universe are now converging for the first time since the Great Depression.
Over the next several years, these cycles are predicting a sweeping global debt collapse — an epic crisis of confidence in central banks, governments and the global monetary system as we know it.
As has always happened in times of crisis, millions of investors worldwide will rush into the ultimate “safe haven” investment: gold. I am firmly convinced that this is just the beginning of the greatest bull market in gold any of us will ever see.
In fact, in the years ahead, the price of gold is likely to more than triple from current levels to $5,000 or higher — and do so more quickly than most investors imagine possible.
In fact, a $5,000 target for gold could prove to be far too conservative, judging by another indicator that has gold bugs excited: the golden cross. This occurs when gold’s 50-day moving average crosses above its 200-day moving average.
After this indicator flashed a buy signal in 2002, it sparked a rally in gold that carried it 588% higher! A similar move this time around would take gold to more than $8,800 per ounce! Now I’m not saying $8,800 gold is a sure thing. But it shows the kind of massive upside potential we have ahead of us in gold … and especially select mining stocks.
I personally recommend that every investor maintain a solid stake in physical gold as a hedge against bad times ahead. And that’s still solid advice given these uncertain times.
But knowing gold is likely to explode higher from here isn’t enough. You need to ask yourself, “What is the best way to profit as gold soars?”
Investors can buy gold or silver bullion to profit from the next big move, just as the Real Wealth Report has long recommended. Or, you could buy “paper” gold — shares of ETFs that track and hold physical gold like the SPDR Gold Trust (GLD), which I also recommend.
But if you look back through the long history of previous bull markets in precious metals, one thing is crystal clear. That is, the shares of select gold and silver mining stocks give you the most bang for your investment buck.
For my money, miners offer the very best profit potential by a wide margin
For proof, simply take a look back at the recent past…
From 2000 to 2007, physical gold gained 214% in value during the first phase of this secular bull market. But the Barron’s Gold Mining Index soared 577.3% in value! And the cream-of-the-crop mining stocks performed MUCH better than that …
- McEwen Mining shot up 2,870%…
- Silver Standard went up 3,753%…
- And Klondex Mines shot up an
astounding 6,913%.
Then from 2008 to 2011, gold gained 149%, but gold mining stocks surged nearly 300% higher over that same period.
And once again, the best select mining stocks did far better.
- Great Panther: Up 2,947%…
- First Majestic: Up 3,511%…
- Kaminak Gold: Up 6,182%.
This relatively greater volatility of gold mining shares works in both directions. As you can see in this next chart, while gold itself is only 27% off its all-time high of $2,451 an ounce, mining stocks are still down 57% from the peak.
That illustrates the downside risk. But it also means miners have a lot more upside potential to notch new highs and beyond. How much more?
This next chart provides the answer, and it is THE most important chart you may ever see when it comes to helping you amass a small fortune in the next phase of the gold bull market.
Since the December 2016 low in gold, the yellow metal has risen nearly 22%. But gold mining stocks are up more than 70% … three times more than gold itself.
But if you’re tempted to take your profits off the table now, don’t do it. That’s because there’s still a LOT more room for miners to go on the upside, if history is any guide.
This chart tracks every bull market in gold mining stocks since 1942. As you can see, the median bull market gain historically has been nearly 500%! And the biggest bull markets of the past 50 years have produced gains of 600%-plus … in other words, we ain’t seen nothing yet!
The reason why mining stocks outperform gold by such a wide margin is simple: leverage! Miners own vast gold and silver reserves, a portion of which they produce and sell each year, hopefully at a sizeable discount to the market price.
The best mining stocks to own are those that:
#1. Have the lowest costs. This means the biggest spread between their operating expenses and the price at which they sell the metal. The wider the profit margin the better, and …
#2. Own vast undeveloped gold and silver reserves in the ground. Those become much more valuable as precious metals prices rise.
The perfect combination to look for, then, is: select, high-quality mining stocks with low costs, and fat profit margins that can ramp-up production as gold and silver prices rise.
My 7-point checklist for picking the best mining stocks:
There are thousands of mining stocks traded on major exchanges in the U.S., Canada and especially the Over-The-Counter market. Most of them are not very well-positioned to take advantage of the next phase of this bull market in gold. That’s why it’s important that you know how to pick the very best ones.
It’s the old 80/20 rule at work: Just 20% of the stocks in the sector will account for 80% of the profits in this bull market.
The rest of them range from solid but unexciting steady growers. Now, those could still earn you triple-digit returns, but not the very best gains …
To poorly managed companies that are burning through cash like there’s no tomorrow. Many will fail even as gold prices soar to new highs …
To outright scams designed to enrich a small group of insiders at the expense of public shareholders. The classic pump-and-dump schemes.
So how can you tell which stocks are set to rake in record profits and 10- to 20-fold gains — and which ones should you avoid at all costs?
Here’s my checklist for how to uncover the miners with the biggest profit potential …
1. Great management: The people running the company must be experienced and competent, with a solid track record of bringing their gold to market.
2. Location: Properties located near other successful mining operations are a safer bet than those in unproven areas. It’s also important that the properties have good infrastructure like roads, electricity and water. And be in politically stable countries.
3. Reserves: Look for proven, quantifiable reserves of gold and other minerals in the ground. Avoid mines that only offer “estimated” reserves. We want a proven and/or provable supply.
4. Low costs: A mine that extracts gold at a cost of $500 per ounce is going to be far more profitable than a mine that has to spend $1,000 or more to mine an ounce of gold. The one number to focus on is the company’s all-in sustaining costs.
5. Low debt: I generally look for a ratio of less than 1-to-1 debt-to-equity. The terms and/or creditors should also be friendly.
6. Low hedging: As gold prices rise, hedging or “selling forward” cuts into profits. It’s important to avoid miners who hedge too much of their production.
7. Plenty of capital: Each company must have sufficient amounts of cash available to acquire,
explore and develop new mining properties.
New Buy Recommendations
With these principles in mind, here are five select mining stock recommendations that pass my checklist with flying colors.
1. New Gold (NGD) is a growing junior miner with 14.7 million ounces of gold reserves. Some 90% are in Canada, one of the stable, most mining-friendly locations in the world. Investors are vastly undervaluing this company’s potential, assigning a market capitalization of only $149.30 for every ounce of gold reserves NGD controls. New Gold has four mines in operation right now, and two more in development, which gives NGD the potential to produce 800,000 ounces annually. That’s an impressive growth curve.
Recommendation: Using 5% of your Basic Survival Strategy funds, buy NGD at $3.25 or better.
2. B2 Gold (BTG) has four operating mines, with another under development, in diverse locations around the globe. The company produced 550,000 ounces of gold last year, and mine production will nearly double to 900,000-950,000 ounces by 2018. Best of all, the market is significantly undervaluing this fast-growing junior miner, with its market-cap of just $374.45 per ounce of gold in reserves!
Recommendation: Using 5% of your Basic Survival Strategy funds, buy BTG at $2.50 or better.
3. First Majestic Silver Corp. (AG) earns about 70% of sales from its silver mines in Mexico, the largest silver producing country. AG owns six producing mines, with two more in advanced-stage development.
Recommendation: Using 5% of your Basic Survival Strategy funds, buy AG at $6.50 or better.
4. Osisko Gold Royalties Ltd. (OR) is a junior royalty company focused on growing its asset base. Currently, it has 16 producing royalty assets and 130 royalty, streaming and metal offtake agreements in place. Most of its core assets are located in North America. The company estimates a 65% increase in gold equivalent ounces mined by the end of 2018. Osisko has zero debt, net of its $287 million in cash.
Recommendation: Using 5% of your Basic Survival Strategy funds, buy OR at $11.75 or better.
5. Coeur Mining Inc. (CDE): is a diversified, growing junior silver miner with 176.6 million ounces of silver reserves, plus 2.5 million ounces of gold. CDE has grown its production more than 20% since 2013. Even better, it has slashed its all-in sustaining costs by 26% during that time. CDE mined 36.3 million silver equivalent ounces last year.
That uptrend should continue this year, as it expects to increase production to as much as 40.7 million ounces.
Recommendation: Using 5% of your Basic Survival Strategy funds, buy CDE at $7.50 or better.
Important note: Place these orders with your broker — at the limit prices specified — to buy each stock using 5% of the funds you have set aside for the Basic Survival Strategies section of your portfolio.
And please note: I realize several of these price limits are below the current market price. That’s intentional. Our cycle forecast calls for another pullback in mining shares near term, so it makes no sense to chase them. Let the market come to you. I’ll be sure to adjust these price limits via a Real Wealth Report Flash Alert if warranted.
Now, the cycles are not in complete agreement on the timing of this next upturn. But that isn’t uncommon, because different asset classes follow their own unique patterns.
Right now, the cycles for silver and mining stocks point to an earlier bottom and turn higher as soon as early November. The cycle for gold, meanwhile, indicates a turn date late next month.
Every day, the cycles should come into better alignment. But one thing appears certain: The next major buying opportunity is just around the corner. That’s why now is the time to start getting positioned for the next big move higher in mining stocks.
Basic Survival Strategy
You are likely not yet filled buying Franco-Nevada Corp. (FNV) as recommended last month. The stock pulled back a bit, but continues to find support, but continue to work your order to buy 5% of FNV at $76 or better. I expect you will soon be filled during the coming correction in miners, as the cycles are forecasting.
Kinross Gold Corp. (KGC). The company has met or exceeded production guidance for five years in a row. At the same time, it has repaid $1 billion in debt. And it has $1.1 billion in cash. Stay long.
Goldcorp (GG). This miner remains well off highs it hit in February. But it seems to be putting in a bottom. The company is focused on its “20/20/20” plan. That is: increasing gold production 20%, increasing gold reserves 20%, and reducing all-in sustaining costs 20%. It still trades below book value, so it’s cheap. Hold!
IAMGOLD Corp. (IAG). Last month, the company confirmed a significant discovery at its Saramacca project of 1.02 million ounces of indicated gold resources, and another 518,000 ounces of inferred resources. That exceeds the company’s initial estimates. Continue to hold.
Hecla Mining Co. (HL). The company’s strategy of investing in long-lived, low-cost assets is paying off. Reserves are growing dramatically, with the company adding 299 million ounces of silver equivalent in reserves even as production goes up. Hold.
Vantiv Inc. (VNTV). This electronic payment processing company went on a tear in August, but has traded sideways since. More good news will come. Keep holding.
Textron Inc. (TXT). This aerospace stock took off like a rocket in September. Now it’s retracing a bit. Raise your protective stop on TXT to $50 and hold.
Freeport-McMoRan (FCX). The Indonesian government is pushing ahead on a deal that will see Freeport divest 51% of its giant Grasberg copper-gold mine in that country. Freeport’s stock is trading sideways to up. Maybe the bad news is priced in. Hold.
Cameco Corp. (CCJ). Earnings estimates are rising for this uranium miner. Hold.
EQT Corp. (EQT). This is one of the biggest and lowest-cost nat-gas producers in the U.S. It’s trying to get even bigger by acquiring Rice Energy (RICE) for $6.7 billion, but activist investors aren’t making it easy. But the deal will probably go through, and EQT will be a force to be reckoned with. Hold.
Hi-Crush Limited Partners (HCLP). More activity in the oil fields is raising demand for Hi-Crush’s fracking sand products. Oil over $50 per barrel is good for this company. Hold.
