The industrial activity of mining removes substances (lithium, uranium, gold, copper, etc.) from the earth’s crust for the purpose of processing it for human use. We use these resources in our daily lives in everything from toothpaste to buildings to computers to cars. The process of removal is undertaken by both junior and major mining companies.
What is a junior mining company?
A junior mining company is a small, early-stage mining company in search of new deposits of gold, silver, uranium or other precious metals and/or minerals. They provide the groundwork for the future supply and demand of attractive exploration projects and heavily contribute to the exploration and development of the mining industry. Junior mining companies, in contrast to Majors:
Are typically lower market cap ($1 million to $500 million) and thinly traded exploration companies
- Stocks tend to be volatile and less liquid.
- Are often considered growth stocks.
- Frequently rely on venture capital to secure financing.
- Typically engaged in mineral exploration and development.
- Main goal is to discover significant deposits and develop resources.
- Seek potential opportunities by acquiring properties that can yield large resource deposits.
- Are speculative by nature.
- Often start off as private companies and then go public to raise capital for exploration.
- Usually highly-leveraged companies with smaller market capitalizations and smaller asset bases.
- Are typically higher-risk.
Investing in junior mining companies:
Many junior miners are penny stocks. These companies usually don’t pay dividends as they need to reinvest earnings to continue growth. However, higher risks are associated with higher profits. Investing in a junior mining company offers the possibility of lucrative returns, rendering them attractive to investors looking for a high yield in a short period. When investing in a junior mining company:
- Analyze drilling results
- Check locations of the properties
- Check for the market cap and total shares outstanding of the companies
- Estimate the political risk involved with the project
- Look at the long-term plans and future demand of the mineral
- Research the management’s backgrounds, expertise, and track record
- Look for the companies with strong balance sheets, low debt and positive cash flows
What is a major mining company?
Major mining companies are large (multinational or international) corporations, often with decades of history and, typically, world-spanning operations. They’re in the production phase and generally have a slow and steady cash flow. These large businesses are constantly on the look-out to acquire new mining projects. They break down profit and cost on a given deposit by the ton. Major mining companies are easy to evaluate and easy to invest in as stocks are generally less volatile.
Mining companies are businesses that explore, extract, process and sell precious metals, minerals and other raw materials used in a wide range of industrial products, capital goods and consumer products. A considerable portion of the mining industry is composed of large multinational/international companies. However, there are a number of junior mining companies in search of new deposits. Each investor must make the decision which to invest in, junior or major mining.
Interested in mining activities and investment opportunities? Check out Junior Mining Hub. We’re a rapidly growing, open access platform highlighting industry events and activities throughout the junior mining sector. Our categorized, searchable information provides a cohesive industry picture. We use our years of industry experience to promote mining activities and investment opportunities to the global community. Contact us today or sign up for our daily email and/or our weekly newsletter.