Financial Literacy for Mining Stocks (Part III) 
Financial Literacy for Mining Stocks (Part III)
by InformedTrades
Video Lecture 4 of 8
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Views: 364
Date Added: May 7, 2017

Lecture Description

Topics discussed in this video:

1. Cash Flow Statement. The Cash Flow Statement, published quarterly and available on finance portals like Google Finance as well as on individual company web sites, show how much cash is going in and out the company.

2. Burn Rate. One of the opportunities studying the cash flow statement allows for is a chance at estimating the company's burn rate -- meaning the rate at which it is spending capital. For companies that do not have mines in production yielding gold they can sell, one of the biggest challenges is ensuring that they have enough capital to sustain operations until they can get their mine in production. So, investors may wish to look at the cash flow statement to get an idea of how much they are spending per year, and compare this with how much cash they have left. Generally, it's good to see a company have enough cash to sustain operations for a year. If they don't, they may need to shut down, sell to a bigger company, or take on debt. Taking on debt sometimes means they have to hedge future production -- meaning the lender owns some of the gold that is eventually produced. Understanding the burn rate helps us find companies that are stable in this regard.

3. Dividend Yield. On the flip side, for companies that are already established and doing well, investors can look at dividend yield to see how much they will get just for holding the stock. Dividend yield is expressed as a percentage. For instance, let's say a stock has a dividend yield of 5%. That means that per $100 invested in that company, investors will get $5 per year just for holding the stock -- in addition to share price appreciation if it goes up (or as a way of countering share price decline if it falls). Gold stocks have great potential to issue dividends when the price of gold rises significantly above the cost of mining, and so value investors seeking dividends may come into established gold stocks with this in mind. Dividends also discourage short sellers, since short sellers have to pay the dividend out of their profits.

Scanning. There are lots of scanning tools; I'll go into them a bit more later. Scanning tools let us find stocks that meet the financial criteria we are looking for. See our shopping guide for some other scanning tools and comments about them from InformedTrades Badge members.

Course Index

Course Description

This short 8-video series offers basic lessons designed to serve as an introduction to investing in gold mining stocks.


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