In this first of four video tips for mining investors Professor Ian Plimer shares his golden rules for buying into the first mineral mentioned in the Bible.

"Hello, I’m Ian Plimer. I’m the Professor of Mining Geology at the University of Adelaide.

"In previous lives I’ve worked underground, I’ve worked in exploration. I’ve worked on gold, I’ve worked on base metals, I’ve worked on all continents.

"The aim of these segments, is to give you, the investor, a few tips about investing in Australia’s mining industry.

"Gold – who gets excited about a lead sinker weighing one ounce? But you really get excited about gold, don’t you?

"Gold is tied to international confidence, and it’s a display of wealth.

"We have the Indian marriage season. We have all these new rich Chinese, who want to show that they’ve made it, and they wear gold.

"So some of us are extremely positive about the future of gold because the biggest gold deposits in the world, like in the Witwatersrand Basin of Johannesburg, are producing less and less gold. It’s much harder now to find gold.

"So what do we look for in a gold deposit? It doesn’t matter where the gold is because you can fly it out.

"Some gold deposits have coarse grained gold, and there are disadvantages to this. You can have the gold stolen. You can have bias in your sampling and your mining, and many a company has gone bankrupt because of the nugget affect.

"So as an investor you need to know, is the gold coarse grain or is it fine grained? The second thing you need to know is, is the gold free milling? And what that means, is if you crush and grind the rock, do you expose grains of gold that you can separate by chemical or mechanical methods.

"Other types of gold deposits have refractory gold, and this is where atoms of gold, or extremely fine particles of gold are inside other minerals.

"Those types of gold deposits have extreme metallurgical difficulties, so you as an investor need to know, is the gold free milling, in other words, we can extract it easily. Or, is the gold refractory? In other words, we can extract it but it’s going to be at high cost.

"The beauty of gold deposits is that you can finance a gold deposit before you actually extract the gold. That often requires the companies to hedge, both the gold and currency, and this again has led to many companies coming un-stuck.

"So a word of warning…gold deposits have very small amounts of gold in them. Only parts per million. If the statistics or the mathematics for the distribution of the gold is wrong you can go broke."