Tuesday

Penny Mining Stocks | List of Penny Stocks

When it comes to trading penny stocks, two words come to mind: high risk and mining. Trading/Investing in penny stocks and investing are two different things – but if due diligence is applied to the process of stock selection, the risks commonly associated with penny stocks can be mitigated. The secular hard commodity bull market has witnessed a few spectacular rises in stock prices and overnight fortunes for some. Millionaires are made from ordinary investors – luck is usually the investment strategy. For every one investor hitting the penny mining stock lottery, thousands have to write off their investments. Many investors invest in penny stocks knowing full well of the risks, and allocate a small percentage of their portfolio into these speculative plays.

Here are a list of penny mining stocks and the share price in 5 years. The returns range from 400-5000 X increase in share price. Imagine putting a small speculative $1000 in any of these companies below – that’s $400,000 to $5000000 in 5 years. I have personally witnessed a member of a forum posting that he had purchased $10,000 worth of a 10 cent copper stock, with everyone (including myself!) laughing at the insanity of putting $10k into a penny stock. The stock went into trading halt few weeks later after a company making discovery, and shot up to $10 immmediately post release of news.

Gold Mining Penny Stocks

How do you begin?

Penny stocks with the potential to explode to the upside (or downside for that matter) are usually in the business of mining. So, you need to find countries rich in commodities such as Canada, Australia or Brazil. Canada and Australia are world leaders in mining. The Toronto Stock Exchange (code: TSX) is where Canadian penny stocks trade. Australian penny stocks can be found on the Australian Stock Exchange (code: ASX). Brazilian mining stocks are listed on Brazil stock exchange (Bovespa). Other exchanges in Europe and South Africa also have small mining companies listed there – these companies may be Australian or Canadian companies seeking more investor exposure in Europe, thus pursuing dual/multiple listing on stock exchanges.

There are thousands of penny mining stocks – where do you start?

Whilst most online brokers have a stock screener, they do not generally have a specific penny stock list, but if you already have the company stock code, you can enter it into the stock screener and do further research.

To get a list of penny stocks, you can try signing up to forums. Most forums will have a list of “top most discussed stocks”. These are good starting points, but the stocks that are most popular obviously may not be the most promising one (or have gone up in price significantly). The sleepers would give you maximal upside. One of the forums we use is ADVFN – signing up is free. It takes some time to get used to navigating around the site, but once you are familiar with it, it’s a gold mine! For Australian stocks, try HotCopper. It is by far the biggest forum around. Others include TopStocks and AussieStocks. Watch out for members who ramp up a stock price for their own benefit – this is common practice on forums and is known as “ramping” or “Pump and Dump”.

Marketwatch is an excellent platform that provides good summary of companies - Marketwatch’s Revolution investing newsletter gives you some information on non-mining penny stocks. Currently there is a Free 30 Day Trial of MarketWatch’s Revolution Investing Newsletter . 

Cramer also provides good leads sometimes. His newsletter has 14-day trial to Action Alerts PLUS, and his latest bestseller FREE. Click here - definitely worth checking out.

What to Buy?

Cashed Up

Most penny mining stocks are cash strapped and are serially raising capital by issuing new stock. Issuing more shares will dilute your share – thus reducing the value of each share (hence drop in share price). Imagine you own ONE slice of a pie with a total of 5 slices. Now the owner of the pie decides to slice the pie up to 10. You still own ONE share, but that slice is now HALF the size of your initial slice! So, pick companies with as much cash as possible. Next, check the cash burn of the company. Find out how much cash the company uses in a year, and work out how long it can survive without having to borrow or issue more shares. We try not to touch anything that needs to raise cash within a year – but this depends on the projects and drilling results.

Commodity Fundamentals

Next thing is most important. Make sure the commodity the company is involved in has great fundamentals. Read up on everything you can get your hands on about the commodity: whether its gold, silver, copper, tin, rare earth, lithium. Picking a commodity that is at all time high NOW may not be worth much if it takes the company 10 years to start producing it. So, try to pick a commodity that will be a winner in the future! Gold, for example, went from $40 to $800 in a few short years, and is now > $1350!

The commodity bull market is in better shape after the Global Financial Crisis. Some argue that not all hard commodities will do equally well. There are precious metals such as gold, silver, palladium and platinum, and there are industrial commodities such as copper, iron ore. All commodities generally go up when there is money printing – but precious metals in particular appreciate the most in these inflationary times.

Here is a list of  Australian penny stocks: