Question To Ask Before Investing In The Gold Mining Business
To any business investments, taking your time is necessary. You cannot just put your hard earned money somewhere you do not know exactly how it works. Business investments in gold mining just like in any investments have their own advantages and disadvantages. There is no assurance or guarantee that your money will earn.
To minimise the chances of loss, you have to ask the right questions before you finally decide plunking your hard earned money.
Questions to ask before investing in gold mining business
Below are good questions to start with
Who is part of their management team?
Put yourself in the hiring management’s shoes, would you give the job to someone who never experienced functions required in your job description? Definitely not. There are many investors who invest their money to gold mining businesses without checking the management team’s resume.
Investing your money to their business means you let their management team handle your hard earned money. It is highly favourable that you choose CEOs that have had previous success stories in the same field. It is necessary that you know their future plans, like possibly selling their mining company to a bigger company.
Another question related to this is ownership of shares. Do the directors and managers own a larger number of shares compared to the floating shares or owned by retail investors? The desired partition is 50% to CEO and directors and 50% for retailer investors.
Where is the gold mining located?
Always, always take in consideration the geographical location of the gold mining. You would never want to invest in a gold mining business located in a country that has political instability and threats of expropriation.
You would never want your money invested in gold mining businesses that consider projects to countries with political situations that are considered risky. You only have to play with companies who take geographical locations seriously.
What is the viability of the project?
Compared to stock exchanges, investing in gold mining businesses is tricky. The revenues will not start, especially for junior miners, until mining starts. This being the case, you are putting your money to a greater risk. You have to get deep into the details to know the probability of earning.
Ask the company’s existing assets, liabilities and liquidation value. Other metrics to consider is net working capital, monthly expenses (including salaries, overhead, exploration expenditures, listing fees and the like), and their ways finding funds to sustain their goals.
The questions above will still not guarantee you success in business investments in gold mining, yet it will minimise the possible chances of loss. Ask as many questions as you can, until you find comfort and satisfaction investing.