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3 Gold Explorers To Put On Your Radar


Gold exploration companies carry more risk than typical mining companies, but they also carry more upside potential.

I try to target gold explorers that have high-potential gold deposits with exploration upside, favorable mining jurisdictions, close proximity to producing mines, and strong insider ownership.

Here are three gold explorers that recently released positive drilling results, and my thoughts on each stock.

3 Gold Explorers To Put On Your Radar

I continue to search for gold exploration stocks that I feel will outperform not only the price of gold (NYSEARCA:GLD), but also the benchmark gold miners index (NYSEARCA:GDX), the junior gold miners index (NYSEARCA:GDXJ), and the global X gold explorers ETF (NYSEARCA:GLDX), which contains a basket of early-stage and advanced-stage gold exploration companies. These are high-risk, high-return type of stocks - a new gold discovery, positive drilling results, or an economically robust preliminary economic assessment or pre-feasibility study are a few catalysts that could send exploration stocks soaring.

Exploration stocks like the three I'm about to mention carry huge upside, especially if gold prices continue to rise. Higher gold prices increases interest in their projects and the chances of a takeover by a mid-tier or senior gold producer. Two recent examples: Goldcorp (NYSE:GG) bought out Kaminak Gold (OTCPK:KMKGF) at a 40% premium back in May, while West-African gold miner Teranga Gold (OTC:TGCDF) bought out Gryphon Minerals (OTCPK:GPHYF) at a 53% premium back in June.

What should you look for in gold exploration companies? Personally, I like to target companies that own attractive gold deposits in politically favorable mining jurisdictions; the deposits should be located next to currently producing mines, as I think this increases the chances of a takeover. I also like to see management have some skin in the game, so I look for heavy insider ownership (at least 5% of the outstanding shares).

Of course, I also want to see successful drilling results, deposits that are open in all areas for expansion, and treasuries that are flush with cash, so drilling campaigns are fully funded. The management team should have a solid track record and plenty of experience as well.

Keep in mind, however, that there are still extra risks to owning shares of gold explorers. These companies are not producing any cash flow from operations, so they must issue equity to keep the lights on. There's no guarantee they will be able to do so. There's also no guarantee the deposits will turn into producing gold mines. The investment could go bust for several reasons, so it's important to be aware of the risks and only invest money you are willing to lose.

Here are three gold exploration stocks investors need to put on their radar following successful drill results:

Balmoral Resources (OTCQX:BALMF)

BALMF data by YCharts

This is my first time writing about Balmoral Resources on Seeking Alpha as I just recently discovered the company. I only wish I had come across this company...