It's a general rule of thumb that when it starts to look like the markets may be in for a downturn, investors start looking to take profits and their positions to cash in anticipation of more attractive entry points later on down the road. Another strategy, however, is a move towards gold and other precious metals, as the value of such properties has only grown substantially over the past decades, especially given the widespread uncertainty surrounding the global equity markets in the midst of the global economic meltdown. Nevada is currently a experiencing a now-generation 'Gold Rush' that is not only creating new jobs in the State, but is also offering smaller companies and speculative investors an opportunity to capitalize on the trend. While the big players in the sector may provide stability and notable growth over the long haul, more speculative investors may dabble with the start-ups and those companies that may still be in the earlier stages of drilling and/or exploration.
One company that fits that bill and whose stock has been trading with increasing volume over the past few weeks is Valor Gold Corp (VGLD). Valor, formerly known as Felafel Corp., came into existence earlier this year as the result of a reverse merger and - as noted in previous discussions about the company - is looking to fully exploit Nevada's remaining gold deposits. Valor has already gained control of 8,000 acres of land in the prolific Battle Mountain-Eureka Gold Belt of the Northern Nevada Rift, which - while containing at least 50 million known ounces of gold - stands as one of the State's major gold trends. On a portion of its properties, specifically in the Red Rock and North Battle Mountain areas in north-central Nevada, initial exploration has revealed evidence of existing surface and shallow-drilled gold deposits and Valor is carrying out plans to fully exploit those areas.
Until returns are met in the form of mined gold and/or other minerals or precious metals, start-up mining companies are considered highly risky propositions, as there are no guarantees of findings and no methodical approach to development, in comparison to the clinical trial process undertaken by developmental biotech and pharmaceutical companies, for example, and many investors tend to wait for definitive proof of success before jumping in. That said, when such companies trade sideways for a time with speculative risk in mind and then hit 'paydirt,' or 'paygold' in this case, then the immediate potential for a significant upside in valuation exists. As with other sectors, some investors like to already be 'in' a stock or a company - whether only modestly or not - in anticipation of such a development, and that is what makes start-up mining picks such as Valor intriguing plays to complement a speculative portfolio.
In addition to consideration towards the lands controlled by a start-up mining company, investors also look towards the management team in assessing the overall potential of a company to follow through on its promises; after all, in this sector investors are generally left to solely rely on the words of company officials that drilling and exploration is moving along as planned. In the case of Valor, the management team is compiled of long-standing members of the international mining sector and, additionally, the company's Chief Geologist has strong ties to not only Nevada gold exploration as a whole, but also to many of the larger companies in the field that have already explored the region. Those facts and established connection may add an additional layer of credibility to company in the eyes of potential investors.
VGLD shares have traded relatively flat since the opening days of September, with modest spikes here and there, but volume has been picking up noticeably over the past week, and Wednesday's volume registered as the highest-volume day for this stock since July. That could be a sign that new interest is coming in as investors catch on to the new "Gold Rush" fever that is making its way through the hills and highlands of Nevada. Many will look to capitalize on the renewed vigor behind gold mining in Nevada and Valor may be just as positioned as any other start-up to benefit, given the experienced management team and potential of the lands controlled by the company.
With volume growing, VGLD is one to keep an eye on.
Disclosure: No position.
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