Mining companies are the companies which are into the business of excavation of mines and then exploring the natural resources namely uranium, coal, molybdenum, copper, silver, and gold. Let’s have a closer look on some parameters for resource sector stocks:
Mineralization: The occurrence of a marked mineral in a mass of host rock is acknowledged as the Mineralisation. The foremost thing that an investor must keep in mind is that high-grade mineralization is proportional with the deepness of the intersection and at the same time relative to the dimensions of the intersection.
The grade can be considered as the average amount of gold contained in a tonne of gold-bearing ore expressed in ounces per tonne. It is typically evaluated in terms of the g/t, i.e., grams per tonne.
Stable Political Scenario: An investor must invest in those mineral companies which have got their majority of portfolio assets in the form of mines in the regions and geographies which can boast upon their stable political conditions. Hence investments of mining companies which have mines in the countries where the political situation is unstable, and the rule of law are less respected would be in jeopardy.
Longevity in Reserves: It is considered very critical while investing in a mineral company to first understand and gain knowledge about, how long the company’s natural resource reserves are going to last. The company which has a low resource portfolio must maintain consistency in its exploration programme results, so as to maximize the production. However, that kind of success is not guaranteed, hence a company with the high resource reserves are always a safe bet for the Investors.
A broad base of operations: So as to have a hedge against the risk of being dependent upon a single mine’s production or any politico-economic instability, an investor must choose a mining company with a diversified resource base. To achieve this kind of diversification mining companies usually, acquire various mines at diverse geographical locations across the globe. Hence as and when there is a downturn in the commodity and mineral prices across the global markets a lot of buying is seen in that space by major mining companies.
Steady production: The investors must have a keen look into those major mining stocks with steady and stable production outlook. In the markets, some of the very highly talked about mining stocks are generally those penny stocks which are yet to commence with their production of an ounce of gold or other minerals. Many of them are still at such nascent stage that they must first increase their resource base to decent levels and are yet to perform the feasibility study upon those project of theirs before they start any production.
Low production costs: Better mining stocks have a diversified portfolio of development projects, and hence their strong base of production cuts the risk of relying on a single asset as well as the large operations base provides them the needed operating leverage which results in the optimization of costs.
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