There is no doubt that the value of precious metals such as gold and silver has risen drastically within a decade. Even today, their prices are rising due to increasing demand for them coupled with restricted mine sites across the world. When it comes to investment, junior exploration companies tend to benefit you the most. However, the question is how to pick the right one. At this point of time, you also need to ensure that you are not becoming a victim of a scam.
The Significance of Junior Mining Firms
A junior mining firm refers to an exploration enterprise whose chief purpose is to find new mines for several valuable metals. These firms tend to target sites that are alleged to have major potential for large deposits. Therefore, the junior exploration firms are a chief resource of future supply of mines. They are expert in locating hopeful sites, using the raw material optimally, and establishing mines for adequate production. These companies tend to hire highly trained geologists and engineers in their staff, who are proficient enough to determine whether a site or property is reasonably feasible. In a nutshell, the role of junior companies is crucial in the initial stages for eliminating the lag time between spotting of a new mine and extracting metals.
The Working of Junior Mining Companies
In the world of mining, two types of exploration tend to dominate: Brown and Green fields. The latter one mainly covers unknown territory, where it has not been known that metals or minerals exist. On the other hand, the brown field entails the areas where deposits were formerly found. Of the two, it is clear that the green fields are costlier as well as riskier but the possible reward is much higher as well. That is why you may get to hear about green and brown fields’ investments that encompass firms engaged in new production areas or leasing the old ones. After selecting the site, the junior firms map the region’s geological characteristics in detail. At this point of time, geologists utilize on-site analysis as well as remote sensors from air to assess the physical properties of potential ores. Lastly, target areas are decided for conducting a deeper research to obtain a clearer idea of where to begin excavating. Because of such crucial role, it is obvious that junior mining companies are ideal for investment.
Factors to Consider for Investors
In order to research, the investors need to start by examining the company’s portfolio of projects and sites. It is wise to comprehend the type of each property as well as the type of projects. While doing so, there are some factors to consider such as location, management, and government reign. Firms with properties or projects that are close to the working mines are typically safe to invest in than those with green fields where no discovered deposits are known. This is because the former ones indicate the presence of ready infrastructure, such as electricity and water and also good weather.
Talking about management, it is agreeable that a majority of junior mining firms depend on small teams for management. However, this does not mean that the quality of the staff is poor. So, for assessing the management power, you need to find answers to a few vital queries: Are there geological engineers with diverse experience? Is there a good track record of locating metals?
Similarly, it is also very vital to assess the governmental regime, as not all nations are considered friendly for mining. However, political changes can force the government to alter the policies immediately. This is a kind of political risk that you need to assess. Therefore, look for companies with rich sites in a mining-friendly area with least intervention from the government.