Investing in a mining company requires sufficient marketplace research as well as a good look into the various levels of investment risk in the industry.
While many investors have seen good return on their investments with junior mining companies, it is worth looking at different sized mining corporations along with the commodities sought, exploration plans, management teams and financial books.
Investors are attracted to top mining companies as the population's demand for certain metals and minerals seemingly continues to exceed the supply. In turn, commodity prices rise and the success of the investment grows.
Before investing in either junior or top mining companies, it is vital to consider the following:
  • Opportunities for exploration: The exploration process can increase or diminish the financial value of any mining company. Exploration is an extremely intricate and expensive procedure, therefore the equipment, assets and practices of a mining company should be evaluated by a professional prior to any large investment. A mining company that is unable to deal with the exploration phase using strong economical sense can result in financial devastation.
  • Commodity Supply – Consider how the commodity is valued in the marketplace, how it has been valued in the past and attempt to scope whether it will maintain, lose or gain value in the future. Rare earth elements, for example, are expected to see a massive incline in demand as the world becomes more and more dependent upon them. In turn, determine how common the supply is for the commodity in question.
  • Resources and Company Fundamentals – Mines and oil are not infinite resources. Each exploration and operation must produce lucrative results. In order to remain sustainable, a company will only maintain a cash flow through successful mining operations.

Prior to investing in either a junior or top mining company, evaluations should be conducted to determine whether the investment is of low risk, medium risk or high risk:

  • Low Risk: Investing in a majorly developed and long-standing top mining company that will render profit from an inevitable increase in commodity value.
  • Medium Risk: Investing in a base metal company that only mines for a limited number of commodities, for which the increase in value is merely speculated.
  • High Risk: Investing in a junior mining company set to embark upon their first exploration or mining operation.
While investing in top mining companies is a low risk venture, there have been patterns indicating that many investors have had much success investing in junior mining companies.
Top mining companies throughout the world are currently exploring new locations to mine for rare earth elements that are becoming increasingly scarcer as China places restrictions on global distribution. Investors are wise to venture with both top and junior mining companies that will be conducting explorations for rare earth elements.
Holmium is one of the scarcest of the rare earths, but it has many uses as a technology metal. Along with all the other rare earths, it is imperative that there is a varied supply with less dependence on production from China.
Intrusions can be a veritable roadmap to finding many different minerals. Many methods exist that lead to mapped intrusions making it easier to locate other intrusions and minerals.
Rare earth pricing is continually on the rise due to the scarcity of materials. Investors with speculative capital are dominating the buying causing higher price increases.
The element yttrium plays a vital role in the world’s everyday existence. Currently mined in China, countries are looking for new places to satisfy the increasing demand for yttrium and the other rare earth elements.
Niobium is mined in only a few countries in the world. Canada is the second largest producer of niobium contributing about 7% of the world supply.
Strategic metal demand is increasing and the supply is becoming scarcer, due to China’s intentions to cut back on exportations. Countries are looking for new sources to match the demand for strategic metals with sufficient supply.
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