It must be mined if it isn’t grown. This statement has possibly been used in a few different ways. Both those who are bullish on mining companies and those who are concerned about the effects of mineral depletion on the environment use it. Both of these groups are correct that mining is a significant industry, despite the fact that they emphasise it in quite different ways. Most modern products contain components that were originally buried beneath the soil. Majors and juniors are the two true categories of mining equities. The majors are well-capitalized businesses with a long history, global activities, and a gradual but regular flow of cash. Large oil corporations and major mining companies are similar in many ways, and many of the same criteria still apply with a mining twist. Although mining companies report profit and cost on a given deposit by the tonne rather than the barrel, both have proved and probable reserves. In conclusion, a mining major is simple to assess and simple to invest in. The junior mining equities are almost exactly the reverse of the major mining companies. They frequently have limited resources, recent histories, and lofty expectations for future profits. An organisation that is developing or attempting to develop a natural resource deposit or field is known as a junior company.
Major and junior mining stocks valuation:
Although majors and juniors have quite distinct business models, they are all connected by the one thing that distinguishes all mining companies from one another: the use of all in-ground assets. The problem is that until a deposit is completely excavated, mining companies are unable to determine its exact size. As a result, a mining stock’s value roughly tracks the market value of its reserves, with a premium given to businesses who have a long track record of effectively selling their deposits. Feasibility studies are used to assess reserves. These analyses independently confirm a deposit’s value. In a feasibility assessment, the deposit’s projected size and grade are weighed against the costs and challenges of fully extracting it. It is practicable if the deposit will bring in more money on the market than it will cost to dig it out. Of course, the reverse is also true. A junior miner frequently abandons a viable deposit before it is fully mined. Instead, they part ways and look for another deposit after selling the deposit (or themselves) to a bigger miner. In this way, junior mining stocks serve as a conduit for exploration that ultimately feeds the major miners. According to this theory, junior mining is where most of the significant risks and benefits are found. You may be considering investing in junior mining stocks or large mining stocks if you’re a prospective investor in the mining industry. What you are looking for will determine the response. In the right market, juniors have a lot to offer and could be highly valued. Because of this, they are a great place to invest risk cash, but not the best place to deposit your Social Security benefits.