Precious Metals Miner Releases Estimate of 6.6 Million Ounces for New Deposit: PLG

Published on Friday, October 19th, 2012
By Sasha Cekerevac for Penny Stock Detectives

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In anticipation of September’s Federal Reserve monetary policy announcements, many precious metals skyrocketed. This substantial increase in the price of precious metals across the board has certainly benefited many firms, including junior mining stocks. The main advantage for investing in junior mining stocks is that they have a higher level of sensitivity to increases in the price of precious metals. Of course, this also works in reverse, as well as potential risks associated with operational difficulties.

Junior mining stocks have to deal with many issues, including the price of the precious metals, as well as labor difficulties and new regulations. Also, junior mining stocks that are in the exploratory phase can be quite volatile due to the lack of production stabilizing earnings. Because of the lack of steady earnings, the capital appreciation possible is primarily based on what their exploratory work results in. If a large amount of precious metals is found, it’s extremely bullish for junior mining stocks. If, on the other hand, the drill results end up showing a lack of precious metals, the stock will plummet. These are risks one must be aware when investing in junior mining stocks.

While many investors look to gold when thinking about precious metals, I suggest considering platinum. Of course, this is not an easy task. Platinum isn’t easy to find or to extract, so one must be careful when investing in junior mining stocks in the precious metals sector.

One of the interesting junior mining stocks in the precious metals space is Platinum Group Metals Ltd. (NYSE/PLG; TSX/PTM). This is one of the penny stocks involved in exploring for platinum and precious metals, and it has recently issued some progress reports.

Because this is an early-stage exploration firm looking for precious metals, caution is urged. You certainly don’t want to rush into any junior mining stocks too fast. I would suggest patience, as it takes many years of work to fully understand the full extent of precious metals contained within a property. Following the drill results, it then takes more time to start extracting the precious metals.
Platinum Group is exploring its Waterberg property. The firm has discovered a new deposit within the property, announcing an estimate of inferred mineral resources of approximately 6.6 million ounces of gold, platinum, and palladium. The company breaks down its estimate as 3.73 million ounces of palladium, 2.05 million ounces of platinum and 0.81 million ounces of gold. (Source: www.platinumgroupmetals.net, September 5, 2012.)

 

Chart courtesy of www.StockCharts.com

 I first brought this precious metals miner to the attention of my readers back in early August, when it was trading at $0.82. Following the good news, the stock surged to over $1.30 the following month, a move of over 60%. Obviously, that kind of move is not sustainable, as evident by the overbought condition the Relative Strength Index. Unfortunately, the stock was unable to hold above its 200-day moving average, and has since fallen back, although it’s still substantially higher than the price in early August.

Junior mining stocks involved in precious metals can offer a large potential reward, but also possess serious risks. I like watching the charts, and seeing what other investors are doing with their money when considering investing in junior mining stocks. The precious metals sector does have potential pitfalls, so I tend to be very careful about what junior mining companies I invest in. At this stage, one needs to understand that there are still substantial hurdles for this stock to overcome and far more due diligence is required by an investor considering this stock for their portfolio.