If you follow our work here at The Rum Rebellion, then you’ll know just how speculative gold stocks can be.
Take De Grey Mining Ltd [ASX:DEG] for example.
This minerals exploration company focuses on exploration and development for gold, silver and base metals in Australia.
Currently basing operations in the Pilbara region of Western Australia, the DEG share price has skyrocketed over 350% in the last 12 months.
Sure, gold has been doing well.
Demand is so high right now that we could be running out.
But since DEG doesn’t even produce gold, there are likely other factors contributing to its meteoric rise in share price.
Picking a winning gold stock is rarely a simple task.
That’s what makes the speculation around DEG a great case study.
When preparation meets opportunity
The graph above shows the USD spot gold price (blue) in relation to US (orange) and Aussie (grey) gold miner indexes compared to a global index of stocks (red).
Basically, what this graph tells us is just how well gold has been doing against the rest of the global market.
DEG doesn’t have any gold to sell.
But it does have opportunity to sell.
And that’s what matters.
De Grey’s shares have been on a tear since February when it had a series of positive announcements about drilling results from its Hemi prospect, part of its Mallian project.
And they haven’t relented either.
Since first entering what would become a myriad of trading halts to bring news of their new discoveries to the market, shares have soared.
DEG has managed to raise just under $36 million over the past few months via a cap raising ($31.2 million) and the exercise of options ($4.75 million) to aggressively explore the Hemi discovery.
De Grey aren’t the only junior prospector going to market for cash.
Why not capitalise on the interest and grab some money while you can, would be the reasoning.
After all, the price of gold is at its highest level since late 2012 and some gold stocks are going nuts — investors are bound to want a piece of the action.
What do DEG shares get you?
De Grey recently upgrade its confirmed resource at Mallina to 2.2 million ounces at the beginning of April.
Meaning if production begins, costs can be kept lower than if the resource was located deeper in the ground.
With fresh cash from the recent cap raisings, incoming managing director Glenn Jardine now has a significant war chest to further exploration efforts.
However, before you go out and buy DEG or any other gold stock, make sure you read our report on gold stock selection.
In this free report, Rum Rebellion editor Greg Canavan will teach you the things he thinks you need to differentiate between a winner and a loser.
The Rum Rebellion