Mining Stocks vs Physical PM

[fishduck]

I know this topic is probably buried in the forums somewhere but I couldn't find it and this being a question I constantly ask myself even to this day I was wondering if you could share your thoughts on this.

Mining stocks have been generally touted as PM on leverage, so what people would say is that if you want to get exposure to PMs and maximise your returns, you should invest in good quality mining stocks.

Now the questions I ask myself:
1) The whole point of getting into PMs for people was to get out of fiat. Mining stocks are valued at fiat and even if it rises its still valued at fiat. In a high/hyper inflation scenario, mining stocks will still be valued at fiat.
Would people still want to own mining stocks and put value it in when the currency it represents is falling by the day?
I thought the whole point for people getting into PMs was to value their wealth in oz's (or kilos), not fiat. But by investing in mining stocks, they are doing just that.

2) Do you see mining stocks as stocks first or PMs first? If it seen as stocks, then they are subject to all the risks that stocks have (management risks, geopolitical risks, political risks, environmental risks etc).
Go to any good sized mining company AGM, you will always have environmental activists in the meeting, especially with this country where people are quite concerned about climate change.
What kind of rate of return are we justifying to take the level the risk ?
In conjunction with point 1 above, what would the justifications be to own mining stocks over PM?

3) What if PMs go up, but the mining stock doesn't for whatever reason? Or what if the stock went up but went down when PMs are rising? Unless you're a really good stock picker, this is bound to happen. Is it still worth getting into stocks?

These are the main questions I constantly ask myself and was wondering why some people here are buying mining stocks. I might have some more questions on the way but I'm trying to see if it's worth getting into with the questions I have.

side question) Will we ever see the day where a general super fund would have a high weight on PM mining stocks or give you the option to invest your funds into that sector or even directly into PMs?

side question)

 

[Grizzly]

My take only.

Your question 1). There are different kinds of stackers. People worried about a SHTF scenario and a general collapse of fiat currencies are different from people looking for exposure to PMs as an asset class in their wider investment strategy. Personally I fall into the later, so I have both physical metal and mining company shares.

Your question 2). Subject to all the risks you mentioned, the share price will generally correlate with the price of the commodity being mined. However, with these higher risks, comes the potential for higher rewards. Many mining companies will go nowhere, some will go bankrupt, some will be worth many multiples of their low prices. As in 5 times or 10 times more. Do you think silver (for example) will go up 5 or 10 times from its current price? These companies are very hard to find though and come with high risk. You could lose all of your investment. Whereas if you have your PMs safely tucked away somewhere, you are only subject to upward and downward price fluctuations of the metal itself. PMs are safer, but the upside reward is lower. Generally speaking, the same applies to almost any investment I can think of. The lower the risk, the lower the potential for reward.

Personally I own a mixture. I have mining companies like BHP, Rio Tinto that I bought years ago when mining as a general industry was in the dumps. I don't think I would buy them right now. I have other smaller, riskier mining shares that I won't name individually because I consider them too risky, but as part of a wider basket of mining companies they give me leveraged exposure to PMs. I am prepared for and expect some of them to go bankrupt. Some will survive and thrive. It really depends on what your individual risk tolerance is, mine is fairly high, and how long you can afford to wait for the investment to play out.

 

[Skyrocket]

Mining stocks are another fiat derivative. Normally one can make more money in mining stocks over holding pyshical PMs in a PM bull market. However if there is a SHTF senario mining stocks can be just as risky as other stocks. If PMs go to the moon in a SHTF senario it is likely that governments will nationalize mines to save themselves. In SHTF the best is to have the pyshical PM in your hand. If you don't hold it you don't own it.

 

[JohnnyBravo300]

If PMS go to the moon I will be at my claim digging the gold up full time! No ones taking what I worked hard for that's for sure.

I've been wondering about mining stocks too. Good questions.