This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Mining Companies: Why Smaller Is Better

Stocks in this article: HGD

It's certainly true in mining (as in any other business) that the more outlets you operate, the more things can go wrong. However, more unique to mining is the reality that as these projects grow in size individually, the number of things "that can go wrong" increases nearly exponentially.

We can start with the environmental/permitting issues. Very large mining operations tend to be "dirty," thus they impact a much larger geographical radius (even in proportion to their size). Depending on the location, the permitting process ranges from difficult to impossible, and is usually much longer than the permitting process for smaller projects -- delaying return on capital investment.

A parallel but different problem are the aboriginal land claims that often exist in the regions in which these mining companies explore. Again, with these mega-projects impacting a much larger radius, it is much more likely land-claims will add further costs, further delays or sometimes prevent development altogether.

Assuming that a large-cap mining company eventually completes the permitting/land-claims obstacle course and actually gets the "green light" to develop a project, we then get to mine construction. This starts with the fact that given the previously mentioned hurdles these projects face, construction usually begins behind schedule.

With our banker-produced inflation causing construction costs to soar, the "feasibility study" which produced the cost-estimates for construction is often obsolete before the first piece of construction equipment arrives on site. Similarly, large projects take longer to complete. Not only does this delay the return on capital further, but it generally guarantees even more cost-overruns.

While this does not provide a complete picture of all the additional headaches which come with attempting to develop a mining mega-project (I haven't even touched on the issues of financing such projects), by now readers should have a pretty good picture of the nightmares involved. Given that these are the only projects which large-cap (gold) mining companies seek to develop, is it any wonder they are among the world's worst corporate under-achievers: resource-producers who are floundering in a resource-starved world?

While this paradigm affects the entire mining industry, it is especially acute with respect to gold and silver miners. This is simple economics. Many of my previous commentaries have documented the relentless suppression (by the banking cabal) of gold and silver prices.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs