Why Mining Stocks Are Risky Business

The human toe touched my lips hours before the mine collapsed. 

Nick in the Yukon drinking.jpgThe toe was easier to swallow. 

You need context, dear reader. 

I’ve been on a tour of Yukon mining properties and projects for the past few days, taking chartered flights in and out of Dawson City — the cradle of the Klondike gold rush. 

Downtown is still an ode to miners of yore. It’s home to the boringly named Diamond Tooth Gerties, a fully operating casino with multiple stage shows each night. 

It’s also home to the Sour Toe Cocktail Club, which has its genesis story in a miner’s frostbitten hallux. 

The cold is just one of the risks of mining in the Yukon.

On Saturday, I visited the Eagle Gold Mine operated by Victoria Gold Corp (TSX: VGCX). Shares had closed out the week at C$7.30 and the mine was operating normally. New blasting was being set up in the pit, ore was being trucked, crushed, conveyed, and sent to the leach pad. 

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In the overnight hours from Sunday to Monday, that leach pad collapsed. Shares, after resuming from the required — and perhaps delayed — halt are down some 90%. 

Yukon company visit landscape.png

Mining is risky and money heaven is real. 

Eagle was the only active heap leach mine in the Yukon. It may very well be the last. 

In an era of ESG and needing First Nations’ blessing, any new leach operations in the area are going to be a hard toe to swallow. 

That includes the nearby Casino project, which is a world-class copper-gold project owned by Western Copper & Gold (TSX: WRN)(NYSE: WRN) that is on the cusp of entering permitting. Its timeline has now been pushed back by years, if not indefinitely. Its shares sank nearly 10% on the news. Many of the nearby companies have seen similar drops in their stocks. 

Mining is a risky business. 

It’s always been that way, of course. 

A gold mine, quipped Mark Twain, is a hole in the ground with a liar on top. Many lives and fortunes have been lost chasing flashes in streams and hills. 

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Last year, Panama stole First Quantum’s (TSX: FM)(OTC: FQVLF) giant operating Cobre Panama copper mine. This year, the Biden administration blocked the creation of a road for the Ambler Mining District in Alaska, effectively killing any remaining hope for Trilogy Metals (TSX: TMQ)(NYSE: TMQ). Earlier this year, SSR Mining (TSX: SSRM)(NASDAQ: SSRM) also had a heap leach pad collapse that took human life and sent plenty of capital to the afterlife as well. 

Yet the upside can also be enormous. 

It’s why people have risked life and limb for centuries to extract metal from Earth’s crust all over the world. 

Many perished. Few struck it rich. 

And the more things have changed, the more they’ve stayed the same. 

We use cyanide and mills instead of dredges and picks. 

But mining remains a risky business where the majority lose and it takes significant diligence and a little bit of luck to strike it rich. 

We’ve been fortunate to mitigate the risks over time and deliver large returns for our subscribers and ourselves.

If you’re going to dabble in mining stocks, make sure you have the best research you can get. 

And put your lips to the toe for good measure.

Call it like you see it,

Nick Hodge

Nick Hodge
Publisher, Daily Profit Cycle