Types of Mining Companies

by admin on February 12, 2015

If investing in senior and junior silver miners, you should know what these types of miners have to offer in terms of value and risk. In the area of senior mining, investors can look at income statements and balance sheets and make a fairly good judgment about the company’s value. The situation is different with junior miners where buying silver stock requires looking at charts, the company’s properties, getting to know the management body, and so on. In many of these cases, there is no way of knowing whether a junior miner will make a discovery or not. Some investors just rely on their intuition, but experts recommend gathering as much information as possible. If the management body has done something worthwhile in the small mining sector or in exploration, one can get a feel as to how the company is run.  Another factor that hints to professional management is whether it has previously found a profitable mine.

With junior miners, investors also look at their cash flow and cash balance. While some of them may have good projects, if their burn rate is three hundred thousand per month, with just under a million in the bank, they will go broke in a couple of months. This is a likely outcome if the management does not have access to additional financing. One question to ask a junior miner is how long they will be able to stay in business if things do not pick up as expected. Another important issue is whether the property or project they develop has any potential. Of course, you are likely to get estimates and there is no guarantee that the actual quantities of silver will match these. In fact, geologists, financial controllers, and the management alike will be keen on offering good estimates as to attract investors.

Exploration is not always possible even if the site has a good potential. For instance, even if drill results look promising, the region may not be accessible, and the costs to build infrastructure may be too high. Senior mining companies are different in that. These companies are larger in size, more experienced, and own their mining sites. Given that their mining sites are already established, it is easier for investors to assess how well the miner is going to perform. This comes with fewer surprises and a degree of consistency when it comes to stock prices. Junior mining companies, on the other hand, have to identify different mining sites and explore their potential. There is always a risk that exploration will not result in actual discovery. This can turn quite costly not only for the junior miner but for its investors as well. Many junior miners sell their sites to established mining companies to ensure better returns after they begin exploitation. If the company does not have money to open the mine, however, this is a sure sign of financial losses.

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