Is it possible to loose money mining gold? Nobody wants to loose money mining gold. In the sphere of lose journalism, it is possible to loose money mining gold. Here is a part of one report on a company that “lost” money mining gold.
Entree Gold said a $5.3 million net loss in the first quarter of 2011 was due to increased exploration activities at its Yerington copper porphyry projects in Nevada. “We are advancing our Yerington projects to development through systematic drilling and upgrading of known deposits and by exploration of additional targets. We have been building our team and operations in Yerington and are strongly encouraged by the initial drilling results we have received. In addition, substantial exploration and development work is underway on our properties in Mongolia,” Entree Gold president and CEO Greg Crowe said on Friday.
Seems they did not loose money. As I read it, they invested money in seeking gold. That is a very different thing. Maybe investors “suffered a loss.” But surely they view this as a valid investment in the potential of future profit.
Consider the rest of the report which states:
Entree Gold’s flagship property is the Lookout Hill property in Mongolia, which surrounds the mammoth Oyu Tolgoi copper-gold project currently being developed and constructed by Ivanhoe Mines. As part of its quarterly report, Entree Gold says it has extended mineralization in Mongolia and has formed a $7 million joint venture with Oyu Tolgoi LLC, a subdidiary of Ivanhoe Mines and the Government of Mongolia.
I cannot say if it is a good use of money to invest in this company, or determine if the money would do better in US government bonds. Maybe neither is a wise investment; maybe both are speculation akin to Las Vegas gambling. But then, maybe investing in finding gold in Mongolia is no sillier than investing in USA fiscal prudence. Both are fraught with danger, as in both places greedy, short-sighted politicians will seek to grab from those who generate wealth.
Kind of like Canada’s NDP who seem to prefer spending money earned by others in preference to making money themselves. As proof, consider the newly elected NDP member of parliament who won the election in spite of spending most of the campaign period in Las Vegas. Bet this one will shout loudest about the duty of taxpayers to support students and others who need to spend un-earned money, or at least money earned by others.
Thus let us return to the issue of whether investing in mining exploration in a company with a negative cash flow is the same as loosing money.
I suggest it is not a loss of money. I suggest that Emtree Gold is an investment, not a loss looser. The only thing that is lost in this report is the credibility of the reporter, who probably does not understand the basics of exploring, investing, or developing mines with a great potential to make money. Like all socialists, the journalist who wrote this article probably believes money grows on trees, and that any capitalist who shakes the tree to send down a shower of cash should be heavily taxed to support the ignorant, indigent, and lazy.
Not that I have worked hard today. One very long conference call to deal with mining matters and an obdurate client; one rewrite of a report to focus attention of reality; and hours looking after my granddaughter as mother plays the professional in Fort McMurray. Fun in spite of being a low profitable activity.
Investing in gold is the most sensible investment strategy I can think of. As long as the Fed tries to stimulate the economy out of recession by printing money and devaluing the dollar, gold will rise.
Gold stocks are even more of an opportunity, as gold stocks have not followed the metal’s upward trajectory over recent months. When the rest of the Dow collapses, the gold and commodity stocks will be all that is left standing!