The way to become much, much wealthier is to have many more ounces of gold (or silver). Your wealth needs to be measured in ounces not in fiat money…

...senior mining companies represented a low risk leverage on the gold price. It was a way to “own” more ounces of gold…The senior miners no longer offer the same low risk leverage to the price of gold. Why? Because they are no longer exploring and finding more ounces. In fact most of them are not replacing their reserves. What makes matters worse is that the reserves are being produced at little or no profit…includes the 2008 crash where juniors miners were viciously sold off because without mine production junior miners need to borrow or sell equity to progress their projects. In the panic last year many investors considered these companies would be able to do neither and sold them down to near bankruptcy valuations. The fact that many are now recovering quite quickly shows that the assumptions investors made were false…

Properly selected junior miners come with risk but that risk can be offset with large potential reward. The risk associated with junior miners can be mitigated through due diligence. If you consider all the junior miners available for consideration of your investment 80-90% can be eliminated by just looking at whether they have any qualified geologist with experience on the management team and whether the management team is comprised of full time employees or not…

Then out of the short list you need to consider if they have land claims that are in good prospective areas, politically stable countries, and located where it is relatively easy to construct a mine. You need to know something about geology to do this or if you don’t you need to depend on someone who you trust who is capable of performing the due diligence. Buying junior mining stocks on a tip from a friend or even on chart analysis is not the way to mitigate risk…

The share price of the company doesn’t reflect this massive improvement in the asset base or the risk reduction from transitioning from a cash burning explorer to cash generating producer. But I have every confidence that it will and so I don’t have to fret about the daily movements of the share price…

The simplistic approach of choosing the biggest names in the business, the so called senior mining companies, will not be the key to success. What you can count on is that the seniors will be looking to buy out successful juniors and at good premiums because it will be the only way to replace their reserves quickly and at low risk. This of course will eventually drive up the price of juniors as the large mining companies compete with retail investors to own the successful companies.