Frank Curzio's WALL STREET UNPLUGGED Podcast

Marin Katusa: ‘How I Make Money Buying Junior Mining Stocks’

marin katusa junior miners

Marin Katusa has been financing and analyzing junior-resource stocks for more than 20 years. And I just finished interviewing him.

He’s spent the last two decades building relationships with some of the richest and most-influential resource investors. I’m talking about experts like Rick Rule, Doug Casey, Lukas Lundin, Robert Quartermain and Ross Beaty.

Granted, having some of the best investment contacts on speed-dial is a huge plus for Marin. But this former math professor is so much more than his contacts.

He uses his background to build mathematical and statistical models that find value in early-stage resource companies.

And over the past five years, Marin has become one of the best-performing portfolio managers in the industry.

In our interview, Marin told me that a big part of his success comes from following a particular set of rules.

Let me explain …

A Resource Investor Who’s Bearish on Resources

Marin is not your typical resource investor. Most of the resource investors I know (including fund managers and newsletter writers) are bullish every day of the week.

They’ve been calling for gold to surge above $5,000 an ounce for five straight years. (Gold prices are trading below $1,200 an ounce today.)

You see those same resource investors on stage at conferences. Their presentations usually begin with a story about how the U.S. economy will collapse. By the end, they are telling you to buy gold stocks and store bullion under your bed.

However, Marin is just the opposite. He has been bearish on the resource sector for two years. He warned his subscribers that these stocks may not have hit bottom yet.

In addition, he said that investors should be selective when it comes to buying junior-mining stocks.

The junior resource sector, as represented by the gold miners ETF, has been in a two-year downtrend.
The junior resource sector, as represented by the gold miners ETF, has been in a two-year downtrend.

Remember, junior mining companies are a lot different than stocks like McDonald’s (MCD) or Coca-Cola (KO).

These tiny exploration companies target properties with huge upside potential. They look for new deposits in gold, silver and other precious metals.

If a junior-mining company stumbles onto a huge high-grade asset, the result could be a quick 1,000% pop in the stock in months instead of years.

To put this in gain in perspective, it would have taken you more than 25 years to earn a similar return on oil giant ExxonMobil (XOM).

These “make you rich quick” stocks are appealing to investors. However, Marin does a great job explaining why most junior-mining stocks will never make you money.

For example, only one in every 3,000 mines ever makes it from the early developmental stages to actual production.

These are terrible odds. 

But as Marin points out, the companies that are successful usually have the same thing in common: an experienced management team.

These are people who know what it takes to develop a mine. That includes building roads, running electricity to the mine and hiring the best geologists.

Beyond that, an experienced team is more likely to keep expenses in check during down cycles — just like the one we are seeing today.

Marin says it’s important these management teams have big insider ownership. That means they are motivated to make the company succeed.

He won’t invest in a junior mining company where the insiders refuse to own shares in their own company.

Making Money in a Resource Bear Market

Most junior-mining companies do not generate any revenue. They need to turn to the debt and equity markets to raise cash. However, the resource sector has been in a bear market for almost four years.

In short, capital has dried up and companies are having trouble raising money to fund operations.

That’s why cash is king in this market. Marin won’t touch a junior mining stock that’s in terrible financial shape — or that may have trouble paying its bills a few months from now.

In the last part of my interview, Marin explains how he recently used these rules to purchase three junior-mining stocks.

One of these names includes Midas Gold (MAX.TO). The once-$4.50-a-share stock now trades for just 42 cents. This company is sitting on 6 million ounces of gold.

Bottom line: Before you buy your next junior mining stock, I suggest following Marin’s system.

This includes investing alongside an experienced management team, investing in companies that have big insider ownership and investing in companies that have lots of cash.

This system has helped Marin find some of best-performing junior mining companies during his career. Several of these names generated 15-20 times his original investment. 

It has also helped him avoid the massive pitfalls that come with investing in this super-speculative market.

Links & Resources

Good Investing,

Frank Curzio