Tuesday, June 29, 2010

The Case For Development Companies

An article by Marc Davis argues that development companies are a good bet for speculative money, provided that their deposits are large and/or rich enough to make for a sure-fire mine. The companies mentioned in his piece are not cheap, having eight-figure market caps, but they have huge deposits.

There is something to be said for this approach, although (as always) the big gains come from development companies with question marks about the transformation of their projects into real mines. The main hurdle is securing financing; while the market awaits for news in that area, a development stock tends to languish. The downside of the sure-fire companies is, they tend to trade near the level they would reach should they go into production.

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