A Guide to Investing in Mining

Proactive Australia defines mining as the extraction of metals and minerals from the earth.

Progress and evolution of technologies often require a lot of metals and minerals. Mineral commodities are used by many industries for making products and technologies for daily life.

The next important thing to know about mining is the stages in the mining lifecycle which can allow you to better understand the risks that you will be taking in your investment. Here are 5 stages in the mining lifecycle:

1. Exploration – Experts try to identify the size and value of the mineral deposit
2. Assessment – Planning and designing the mine
3. Development/Construction – Mine construction phase
4. Production – Mine production (ore extraction, separation of minerals, disposal of waste, shipment of product)
5. Reclamation – Deconstructing all facilities on the property so that the land can return to its original state

Here are the pros of investing in mining companies:

• Mining provides us with essential resources that help us progress and attain a sustainable future.
• Mining is an established industry with predictable trends and patterns that we can learn from history.
• There is an increased demand for mining and finite resources which increases commodity prices and is good for investments.
• There is potential for high returns when you choose the right companies.

Before investing, remember to do your research, seek financial advice, and pin down the type of company and resource that you would want to invest in.

Mining stocks and mining exchange-traded funds (ETFs) will expose you to the profits, losses, and discoveries of mining and exploration companies. Mining ETFs are mining stocks that you can purchase as a single share which takes away the risk of investing in a single mining company. They are usually less volatile compared to individual mining stocks and have the potential of giving you increased returns.

If you choose to buy individual mining stocks, it is important to find quality companies and look into their management/team expertise, jurisdiction, and economics.

When looking into the different types of miners, we usually encounter these categories:

1. Juniors – Low capital exploration companies, early stage, growth stocks, high-risk high return stocks
2. Mid-tiers – Bigger than juniors but not big enough to be a major, developing more than one asset and mineral, in the development and production stage, offers less risk than juniors
3. Majors – Producing mines with proven methods of mining, consistent output, financially stable, multi-asset and multi-commodity

In reviewing majors, NAI suggests checking their operating track record, revenue, and regional and macroeconomic risks. Juniors that find a mineral deposit that they can mine would bring huge returns to their investors.

Remember that mining companies have different investment propositions depending on the metal, material, or resource they are extracting. Here is an overview of the promising mining sub-sectors:

• Precious Metals and Critical Metals – High economic value, precious metals include gold, silver, platinum, and palladium while critical metals include magnesium

Gold Line Resources (TSXV: GLDL, OTCQB: TLLZF), Angkor Resources Corp. (TSXV: ANK, OTCQB: ANKOF), Prismo Metals Inc. (CSE: PRIZ, OTCQB: PMOMF), Tarku Resources (TSX.V: TKU, OTCQB: TRKUF, FRA: 7TK), Canadian North Resources Inc (TSXV: CNRI, FSX: #EO0), San Lorenzo Gold Corp. ( TSXV: SLG, OTCQB: SNLGF). Western Magnesium Corp. (TSXV: WMG, OTCQB: MLYF) prides itself on its disruptive tech that produces clean magnesium, which is a critical metal. General European Strategic Investments Inc. (OTC: GESI) has a diversified portfolio of Tier-1 and district-scale projects including their Transcarpathian Gold Project in Ukraine and Laakso PGE-Nickel-Copper Project in Finland.

• Electric and Battery Metals – Used in producing battery technologies and clean energy, include lithium, uranium, rare earth metals, and graphite
• Base Metals – Inexpensive compared to precious metals, used in many industries, include copper, lead, nickel, and zinc

Mining stocks that prospect base metals include Tarku Resources and Canadian North Resources.

• Others – Include coal, oil sands, gemstones like diamonds and jade, and other commodities

There are many things to look out for when looking at mining investments, from their shares on issue, options and warrants, business plan, management’s track record and expertise, portfolio diversification, backers or investors, ability to hold up well during economic storms, and the long-term forecast for the commodity that they will be mining, among others.

Whether it be gold mining stocks, copper mining stocks, PGM stocks, silver mining stocks, uranium stocks, and so on, it is important to do your due diligence and get to know the company that you are interested in investing in by looking at its history, checking the current demand for its products and services, and seeing if it will be a good addition to your portfolio.