Nearly a decade into gold’s secular bull the mining industry continues to exhibit struggles. And this is best characterized by an ongoing 6-year downtrend in global mine production. For this reason, and the fact that gold is up 373% since 2001, those miners that are able to find success have the ability to greatly profit in this bull. And it is this profit potential that has attracted investors to gold stocks.

The gold-stock sector has been one of the best-performing in all the markets over the last decade, winning investors legendary returns. And these investors are always in search of the next great gold stock. Like any other sector, the larger bellwethers have limited upside thanks to their size and predictability. But also like any other sector, there is a contingent of smaller-cap stocks that hold enormous potential.

These smaller-cap stocks breathe excitement into the markets and invigorate those speculators willing to accept higher risk for the opportunity for huge gains. In the mainstream markets you see a lot of hubbub surrounding biotech stocks. And indeed it is quite a speculative rush owning a stock that successfully engineers and subsequently gets the next great drug approved. On the gold front this rush is realized when you correctly choose the right junior explorer, a company that finds and delivers the next great gold mine.

But provocatively like most small biotechs, the small gold explorers have no sources of revenue. These companies don’t yet have a saleable product, and thus the profitability achieved by their more mature peers is not yet in reach. And herein lies the major risk investing in these junior-level companies. But the antithesis to this risk is the potential for immense rewards.

There is a lot of money to be made in the gold-mining industry. And in a market where this metal’s price continues to trend upward, there is huge incentive to jump onboard. And it actually doesn’t take all that much to go for the gold. Anybody with an entrepreneurial tilt can build a gold company. All it takes is landing mineral rights in a prospective region and getting a geologist on your payroll.

As a result of this ease there are now hundreds of juniors trying to take advantage of this gold rush. But though anybody can form a gold company, not anybody can find…

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