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What are Mining Stocks?

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  • Written By: Christian Petersen
  • Edited By: Susan Barwick
  • Last Modified Date: 15 November 2016
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Mining stocks are shares of companies in the mining industry that are publicly traded on one or more stock markets around the world. Shares of companies involved in almost any aspect of mining and mineral commodities production can be called mining stocks. Some of the most well known types of mining stocks are from companies that produce gold, silver and other precious materials, but a mining stock can also be from a company that produces base metals, ores or minerals like salt or gypsum.

Precious metals like gold, silver, platinum and palladium are among the products of many of the most popular publicly traded mining companies. The price of their shares tend to fluctuate with the prices on the commodities market of the precious metals they produce. Gold and silver are especially hotly traded, as many of the currencies of the world are backed by one of these precious metals, and worldwide economic trends can affect the price of these commodities. Companies which produce gems are also sometimes publicly traded.

Shares of companies which produce almost any type of ore, metal or mineral product are mining stocks. These can include companies that produce ores of iron, aluminum, tin, lead, mercury or almost any other metal. Minerals like coal, salt, gypsum, rock phosphate and sulfur are other common products of mining companies. Some companies may produce sand, gravel or crushed stone to be used by construction industries.

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Quarries are a type of mine that produce stone. Shares of companies in this segment of the industry are also mining stocks. Many types of stone are produced commercially, including marble, granite, limestone, shale and sandstone. Marble and granite are very popular materials for construction, in both decorative and structural roles. Floor tiles, columns, counter tops, wall coverings and entire buildings are often made from these types of stone, and many companies that produce these and other stone products are publicly held and traded on the stock market.

Mining stocks can be very volatile investments. If a company makes a discovery of a rich deposit of a precious metal or other ore, its value can rise quickly. Prices can also fall rapidly if a promising prospecting area fails to yield any significant deposits. Mine closures can have a negative effect on the price of a company's stock, while potentially driving up the price of shares in other companies that produce the same product. Mining stocks, like any other stock, should be carefully researched before a purchase is considered.

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Mammmood
Post 4

@NathanG - Why would you want to mess with gold or silver? I would go with bread and butter concerns, like copper mining stocks. Copper is abundant and in use everywhere. There is no sign of any diminishing demand and it’s less volatile in my opinion. I think it should provide you with a steady return over the long haul.

NathanG
Post 3

@miriam98 - Gold is in a bubble and has been for quite some time in my opinion. I don’t expect an immediate correction, but I do expect a correction at some point.

I’d avoid the gold and any gold related mining operations. If you want to get into precious metals, silver and silver mining stocks are the way to go from what I’m hearing and reading.

Silver is far cheaper to own than gold, and yet it’s used everywhere, from consumer electronics to weapons systems. I think silver is poised for a long bull run. That’s where I’m putting my money, and as I said, I am buying up the silver and the silver mining stocks. I think it’s a bullet proof proposition frankly.

miriam98
Post 2

@nony - Any type of mining stock is going to be cyclical. I can’t imagine owning a mining stock in a company that makes supplies for granite marble countertops in a time of recession. That’s the time to stay out of that kind of investment.

If you really want to make it big in my opinion, look to the future for anticipated demand based on current trends. For example, I recently heard that uranium mining stocks could go through the roof. The U.S. is on the verge of experiencing a shortfall of uranium to power its nuclear reactors.

Thus there will be a great demand for this metal in the near future and the mining operations that mine for it will do quite well. Who would have thought that uranium could be a precious metal?

nony
Post 1

The question becomes do you own the precious metals or do you buy up the mining stocks of the companies that are digging up those metals?

I deal with this issue on a cyclical basis, since precious metals tend to go up and down in value as the economy goes through its boom and bust cycles.

I sometimes buy gold when gold is hot, but I think that buying the gold mining stocks is actually easier for the average investor. The problem, however, is that these stocks can plummet in value; their performance is not based directly off the gold, but off the effectiveness of the mining operation.

Gold can go through the roof but if the mining operation fails, its stock will sink like a rock. So I would be careful about owning the mining stocks unless you’re sure that you’re dealing with a solid company.

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