This mining stock jumped 30 times in price

I was shocked to see a high-flying stock of mine suddenly disappeared from my portfolio a couple of weeks ago. I double checked but it was still not there. I was almost picking up the phone to call the broker to find out what happened, I then decided to do some homework first by searching for the stock. The result showed that the stock (Claude Resources) was not listed anymore but instead this company was acquired by another one and I didn’t realize initially that I was now holding a new stock, SSRI (Silver Standards).  I was even more shocked to learn with a great joy that the price of this tiny “garbage stock” has increased by 30 times now from $0.35 per share to $11. While this is indeed a big surprise, I must say this is what I have been expecting to see from a bunch of such stocks I’m still holding. This is a very unique type of investment with super high risk but also potentially super high reward. I’m talking about investing in precious metal exploration companies.

 

Why is it so unique to invest in such companies? Well, these are typically the early stage mining companies that have no proven reserves yet of gold or silver in their mines. They are almost always heavily indebted and most of them will probably not survive eventually. So in a way, putting money into this kind of companies is very similar to venture capital investment that you are not aiming for any return from many of the companies, but you are hoping to hit just a few with a huge success and reward. Of course, you can try this strategy for all kinds of stocks but I’m particularly interested in the precious metal sector. If you are following my blogs, you certainly know that I’m a big believer for the gigantic bull trend for gold/silver. For me, this bull run has started around 2000 and has much more to go. After a track record of 13 consecutive years of gaining every year that no any other assets have been able to do, gold has gone into a rather long and painful correction in the past 4-5 years. But this by no means the end of the gold bull run. On the contrary, it is just giving it more necessary strength to mount a new leg high move. I firmly believe that gold has much more to go upwards, and potentially may become the official money again when all the fiat currencies, including the US$, collapse. You can call me crazy but I do think this is likely the destine for the US$, if the Fed and the US government continue to play fire with its ever increasing debt. After nearly a 50% correction for gold, it becomes increasingly possible that this correction is over and gold has started its next leg up. So dose silver! I have started to invest in gold/silver nearly 10 years ago and have put money in almost all kinds of forms, physical, paper, and mining stocks. A couple of years ago, I decided to also invest in some exploration mining stocks. I know a veteran precious metal investor who got over a million dollars return by investing just a few thousands for a mining company in the last bull run for gold (back in 1970s/80s). You cannot expect this kind of reward from more matured companies. So I bought a bunch of “garbage” precious metal mining stocks when they were generally around $1 or less. You can imagine it was quite a painful time period of the last couple of years when virtually all the mining stocks were struggling and virtually all of them got decimated one way or the other. But I’m continuing to hold them as long as they are still alive. Looks like my tenacity starts to pay off. Starting from Jan of this year, majority of my holdings of such stocks have gained substantially and most of them have turned to green by now. Claude Resources was one of the most shining metal stocks for me. Within a few months of this year, it had increased my holding over 3 times already. So I decided to cash out a third of it to ensure my profitability from it. Then the story described above hit me. Retrospectively and from the greedy part of me,  I guess I should have held the full position but somehow I totally missed the news when the acquisition was announced. Well I still have quite a few early stage mining stocks in my holdings. I think we will see more and more such M&As in this sector when gold/silver truly resumes its next bull run. I hope some of my current holdings will end up either growing to a successful mining giant or being acquired on the way up.

If you are also considering to buy such companies, just be aware that the key is not to try to find one or two and put all your money into it. It is very risky this way as no one can be sure upfront which one will eventually succeed. The best way to go is to buy a range of such stocks, say 10-15 and evenly distribute your money among them. Keep in mind, you should expect many, if not majority of them will fail but hope just a few will bring some windfall to you!

 

By the way, if you are interested, RRSI itself is a great silver company. I made some money from it a few years ago and I’m happy that I’m holding it now by accident via acquisition. SSRI is kind of mining company that controls a large areas of mineral  deposits that are  economically minable. If I’m right that gold and silver will go up much higher from here, SSRI will be doing great along the way. Actually SSRI was on my watch list to buy when gold/silver is corrected in the near future, which is what I believe will likely occur in the short term. Now I’m already holding SSRI which I have no intention to give up any time soon but I do use covered call options to try to protect it from a possible short term weakness.