3 Alternative Metal Plays Without Mines or Metals; updated 08/29/19 (originally posted 10/17/18)

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Family businesses are tough, especially when you have a large family. So, in 1848, when the youngest brother of a family asked to join his older siblings in their dry goods business in New York City, they were reticent.

Within two years, however, this youngest family member had acquitted himself well as a salesman and trader. Though, he was more of a risk taker than his brothers. So, he set out on his own to California.

This young man’s name was Levi Strauss. When told tale of the gold boom in California, he made the arduous cross-country trip to set up his own dry goods shop in San Francisco. A few years later, he and an investor developed and patented blue jeans. The rest is, as they say, history.

Many of us have heard this story. But its lesson is often ignored. Sometimes, to make money in a boom industry, you need to think outside the box. Strauss was a trader and clothier, not a miner.

So, when looking to get into the hot moving metals and mining industry, you might want to consider these questions.

  1. How do they actually mine the metals?

Long dead are the days of the pick and shovel. Companies in the mining business are huge and have vast amounts of resources at their disposal. More importantly, they own huge tracks of land they need to quickly and efficiently mine up.

So, instead of risking the closing of a mine or the degradation of the ore grade the longer one is in operation, why not look at how the mining itself is done?

Equipment companies are a great alternative to directly investing in mining. Even if a mine dries up and a company has to move to other areas, they will still need equipment: drill rigs, crushers and loaders.

One company worth considering is Sandvik AB (OTC:SDVKY). This Swedish equipment manufacturer has annual revenues of more than $17 billion. It is a major player in mining equipment.

2. Where does it go after it’s mined?

Even if you owned the most valuable resource in the world, it remains worthless until you sell it. So, for precious metals miners, the answer to this question is important.

Fortunately, there are many quite active markets for gold and silver. You could directly trade the metal yourself through a broker. But why not own the broker itself?

Consider Sprott Inc. (OTC:SPOXF), an asset management company specializing in metals. Sprott sells investment vehicles, primarily. Think gold ETFs, trusts and storage.

This company answers the “what then?” question in the mining industry. After the gold, silver, platinum or palladium (Sprott’s specialties) is mined out of the ground, this asset manager makes the marketplace for it.

3. How does it get there?

You are probably not surprised to know that all this precious metal transferring hands around the world — from the mine pit, to the dealer, to your personal safe — isn’t shipped in UPS boxes like some Amazon package. For those trading in such high-value assets, they demand security.

That’s one reason The Brink’s Company (NYSE:BCO) is worth $3.7 billion. After all, it doesn’t own the bank deposits it transports from bank to bank. It also doesn’t own the precious metals, diamonds and jewelry it transports either. But it is one of the few companies trusted to take on that task.

Brink’s is more of a logistics company. And that is a crucial part of the puzzle for precious metals investors… knowing exactly how, when and under what conditions their valuable assets will arrive at their destinations.

Levi Strauss didn’t invent thinking outside the box. He wasn’t the first to make a buck off another’s booming industry. But when it comes to alternative ways to make money off precious metals, his story is still worth telling… and paying attention to.

 

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