Cash Flow of Junior Miners

by admin on February 2, 2015

If you consider investing in junior or senior silver mining companies, you should have a good idea of what these companies offer with regard to risk and value. Those who plan to invest in senior minors can look at companies’ balance sheets and income statements to find out what these companies are worth. 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. There is no way to predict whether a junior mining company will make a discovery in many cases. Some investors just rely on their intuition, but experts recommend gathering as much information as possible. min

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. Although some companies may have developed good projects, high burn rate means that they will have to close operations in a couple of months. This is a likely outcome if the management does not have access to additional financing. The management should be able to respond on the question of how long they can continue operations if things do not go according to plan. Another important issue is whether the property or project they develop has any potential. Naturally, there is not guarantee that the estimates you get will match the actual quantities. In fact, geologists, financial controllers, and the management alike will be keen on offering good estimates as to attract investors. While potential is one thing, especially on paper, exploration is not always feasible.

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. Senior miners are more experienced, larger mining companies that own and run existing mines. 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. Investors take risk because discovery is not guaranteed. This may be a costly initiative for junior mining sites and their investors. 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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