There are more than 3,000 junior mining companies worldwide. But the harsh reality is that most companies will never build a mine. So depending on your investing strategy, you need to be clear about what type of company you are looking at. We've spotted 5 that look really interesting... for different reasons.
You'll have done the math by now. Over 70% of explorers won't get into development or production, but doesn't mean you can't make money on these highly leveraged investment opportunities for a short period of time. You just need to know the rules of the game and be clear about your strategy. Most investors will want to have a portion of their mining investments in these more leveraged plays as it offers the blue sky potential excitement of 'what could be' and 'multibagger returns'. And this is discussion for another article on another day.
Today I want to focus on the lower risk, lower leveraged, investments in development and production companies. Usually these will be longer hold investments, but with steady growth and the occasional dividend! Solid, safe investing, which should also be part of your portfolio investment strategy. So what does a company like this look like.
Before you look at which company, do some research into the commodity you are interested in. What is the macro outlook for copper, silver, gold, lithium... look at the supply & demand numbers. Make sure you verify and validate the source (lots of promoter and brokers pumping a thematic for their own reasons). Use multiple sources as part of your research, including industry bodies and associations. And then do something that very few investors do, stop and think, really think, 'Does this make sense to me?'.
A good company – one with potential to get in to production, let alone be a billion-dollar company – needs to meet some basic criteria. The most important being a stellar management team, with a proven record of success. i look for teams who have built mines before and made money for their shareholders. Management teams backed by resource lenders like Ross Beaty or Rick Rule also come with a high vote of confidence. There aren't that many. As in life, success has many fathers, and failure has few. So it is important to ask Management what part they played in previous success. Sometimes they may have been merely a bystander, albeit in the right place.
However, the key component of a good mining company is the asset. At the end of the day, the company must have a scalable, multi-cycle, economic ore deposit. And with reference to the management team, a well worn phrase that is almost a truism; a good management team can make an average asset work, and a bad management team can make a great project fail. On the whole though, a great asset is a great asset, and even an average management team will struggle to get it completely wrong. So understanding the quality and potential of the asset should be very high on the list. We discuss this at length in our training courses in www.cruxinvestor.com/club
There are of course exceptions to the rule, as ever great assets in jurisdictions without a history of mining or having shown consistent dislike for mining can cause issues that make or break even the best deposit. So focus on companies located in countries with a long history of favorable mining activity. Look for rule of law, clear mining code, an engaged community and government and simple process for obtaining the various licences and permits.
Read the Full Article here: https://articles.cruxinvestor.com/the-next-billion-dollar-mining-companies-5-to-watch-out-for
