When it comes to penny stocks, the companies offering the highest potential are young exploration companies that are in the early stages of development. Certainly, junior mining stocks that are currently producing revenue, while at the same time conducting exploration work, are less risky; but for the big homeruns, penny stocks that are in the very early stages offer outsized potential returns. However, investors must also realize that these penny stocks offer higher-than-average risk profiles.
Tirex Resources Ltd. (TSXV/TXX) is one of many junior mining stocks in the early exploration stage. Penny stocks in this stage are risky, but can be very large winners if they find substantial resources. The firm is exploring in Albania, amassing a property that holds what they believe to be considerable levels of copper, zinc, silver, and gold deposits. The company has rights to 553 square km for exploration and production. (Source: Tirex Resources Ltd. Fact Sheet, last accessed November 27, 2012.)
Tirex has identified 102 geophysical anomalies that need further exploration. The site has at least 17 deposits that are known, with nine of them being previously produced. Penny stocks that are exploring on properties offering a variety of potential precious metals certainly increase the possibility of ultimately developing a financially viable property. (Source: Ibid.)
Zinc is used to make galvanized steel, with China consuming almost 40% of the world’s supply. As we all know, commodity prices are based on supply and demand dynamics. While many are worried that China is slowing down, recent news that China is enacting a multi-billion-dollar infrastructure program should be on the margins of somewhat bullish. Long-term investing in junior mining stocks is all about anticipating where the market will be in the future.
The interesting fact for someone interested in penny stocks is that there aren’t a lot of pure zinc plays. This means that the junior mining stocks left will have a target on their back by bigger players looking to acquire assets. Penny stocks involved in zinc should warrant some attention for those interested in long-term investing. Junior mining stocks do have some risks if their properties don’t yield the resources expected, but the penny stocks that do perform will have the potential for extreme profits.
Chart courtesy of www.StockCharts.com
One of the biggest risks for penny stocks is running out of funding. This is especially true for junior mining stocks that need capital for further exploration work and development. Tirex has alleviated these concerns, at least over the short term, with the arrangement of a $7.7-million financing agreement. This will clear the way for further exploration in some of the new discoveries that the company has identified. (Source: Tirex Resources Ltd. press release, “Tirex Arranges $7.7 Million Financing,” November 5, 2012, last accessed November 27, 2012.)
The stock has traded in a large range over the past year. As the firm continues further exploration work, volatility is to be expected. Junior mining stocks always have a period of waiting until more drill results are released. However, considering that previous investors bought shares at much higher levels, with the recent financing in place, there is the potential for large upside reward if the firm is able to deliver on finding high-grade levels of precious metals.
One thing I do like about Tirex is that it has a huge area for exploration, which is always a positive for penny stocks and junior mining stocks specifically. The more area there is available to explore, the higher the chances are of hitting a high-yielding resource. The downside for penny stocks such as Tirex is that they’re so far from completing mine development and production that impatient investors find it difficult to hold for an extended period of time. Like many junior mining stocks, there are risks, but high rewards as well.
Article Source: http://www.pennystockdetectives.com
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