Mining has evolved through history, read our comprehensive guide to metals and mining for additional insights into investing in the sector.
Gold has been treasured for centuries. Its beauty and finite status give it a timeless value, while its unique properties and historical significance add further value. Gold has been a reliable asset, serving as a safe haven in times of economic volatility. But have you ever thought about where gold comes from? Gold miners play a crucial role in its discovery and production, presenting an investment opportunity. Let's explore why you might want to buy gold miners and the various ways you can participate in the gold mining industry.
Why Buy Shares in Gold Miners?
There are multiple reasons to invest in gold miners, particularly in times of rising gold prices. Investing in gold mining companies offers leverage to gold prices. Essentially, if the gold price goes up, the profits of gold mining companies could rise significantly more than the gold price itself. Additionally, gold miners often pay dividends, providing an extra income stream for investors.
Some of the World’s Top Gold Miners
Newmont (TSX: NGT) (NYSE: NEM)
Barrick Gold (TSX: ABX) (NYSE: GOLD)
Agnico Eagle Mines (TSX: AEM) (NYSE: AEM)
AngloGold Ashanti (NYSE: AU) (ASX: AGG)
Gold Fields (NYSE: GFI)
Kinross Gold (TSX: K) (NYSE: KGC)
Newcrest Mining (TSX: NCM) (ASX: NCM)
Freeport-McMoRan (NYSE: FCX)
Zijin Mining Group (SHA: 601899)
Some Small-Cap Gold Mining Stocks
Seabridge Gold Inc. (NYSE: SA)
Equinox Gold Corp (NYSEAMERICAN: EQX) (TSX: EQX)
New Gold Inc. (NYSEAMERICAN: NGD) (TSX: NGD)
Coeur Mining, Inc. (NYSE: CDE)
Fortitude Gold Corp (OTCQB: FTCO)
Who Buys Gold from Miners?
Once the gold has been mined, it doesn't just magically appear in jewelry stores or bank vaults. There's an entire global network of buyers and traders who purchase gold from miners. These are typically large multinational corporations, central banks, and individual investors. They buy mined gold to manufacture jewelry, create gold bullion for investment, use in high-tech industries, or to hold as a reserve asset.
The mined gold is moved to a refinery and then sold on. Sometimes the mining company is part financed by a gold bullion bank, which will then buy the gold once it has been refined. Also, gold royalty and streaming companies buy rights from the miners.
Where are the Gold Miners Based?
The global gold supply is largely restricted to a limited set of nations, namely China, South Africa, the United States, Australia, Russia, Canada, Peru, and Indonesia.
There are some big gold mining companies publicly listed in the United States and Canada and there are also a number of smaller gold miners and exploration companies trading on the OTC, CSE, and TSX exchanges.
Diverse Ways to Invest in Gold Mining
As well as physical gold and miners, gold-backed electronic accounts, gold futures, gold royalty and streaming, and exchange-traded bullion on the stock market are alternative ways to invest in gold.
Buy Gold Miners
Buying gold miners means purchasing shares in gold mining companies. These can be large, well-established corporations with numerous mines or junior miners who are exploring new territories. As with any investment, it's essential to do your due diligence before buying shares.
Buy Gold from Miners
Purchasing gold directly from miners allows you to bypass the middleman, potentially securing a better price. This approach may involve buying gold nuggets, dust, or bars, directly from mining operations.
It is possible to directly purchase gold from mines or even individual prospectors, but the market for raw gold differs from that of refined gold or gold coins.
When buying gold directly from miners, start by identifying reputable mines in key gold mining regions, or you can use online resources to buy gold nuggets from artisan and placer miners. Once you've found a source, select a nugget based on its shape, appearance, and size, bearing in mind that larger, rarer nuggets may cost more per ounce. To ensure authenticity, you can perform a gravity test on the nugget to determine the gold content.
In 2022, the top 10 mineral-producing states were Arizona, Nevada, Texas, California, Minnesota, Alaska, Florida, Utah, Michigan, and Missouri.
Buy Gold Mining Claim
Purchasing a gold mining claim offers a more hands-on investment approach. It allows you to buy the rights to extract gold from a specific piece of land. These claims can be found in regions known for their rich gold deposits. However, this option requires a significant time investment and knowledge of gold prospecting and mining laws. There are also websites that list gold mines with claims for sale.
Buy Gold Mining Lease
A mining lease is similar to a mining claim, but it usually pertains to larger areas and provides exclusive rights to mine for a set period. Leases are often used by serious miners or companies who anticipate a profitable venture.
Buy Gold Mining Equipment
This option is for those truly committed to getting their hands dirty. Buying gold mining equipment like pans, sluices, or even dredges, can lead to starting your gold mining operation. This, of course, requires a considerable investment, both in terms of money and time, but for some, the prospect of striking gold is worth it.
Buy Gold Mining Shares
Purchasing shares in gold mining companies is perhaps the most common way to invest in gold mining. You can buy shares through a brokerage, giving you a stake in the company's profits. Gold mining shares often respond positively to increases in gold prices, although they are also influenced by the company's operational efficiency and mining costs.
Buy Gold Mining Stocks
While shares refer to a single unit of ownership, stocks refer to a collection of shares. Therefore, when you buy gold mining stocks, you're buying a collection of ownership units in different gold mining companies. This diversified approach can mitigate risks associated with any single company.
Buy Gold Mining Supplies
Whether you are a hobbyist, prospector, or mining company, you'll need gold mining supplies. From safety equipment to mining tools, purchasing these supplies is an essential part of the process. The increasing demand for these supplies represents another potential investment opportunity in the gold mining sector.
Altogether the gold mining industry offers various ways to participate, each with its unique risk and reward profile. Whether you're buying gold directly from miners, investing in gold mining shares or stocks, or purchasing a mining claim or lease, there's an opportunity to participate in the ongoing gold rush.