8020 offers more than connecting with corporations and management. We want to educate investors to help them make better investment decisions. This article and the included podcast is a high-level review of the mining industry. We will look to get into more technical discussions as we go through the education process.
Canada is home a large percentage of the world’s mining companies, and in 2017 alone, 59% of the global mining financings were done on the TSX and TSXV. This is an important sector and industry for Canada and our financial markets. Unfortunately, the next generation of investors has little interest in this sector for many reasons and we feel it’s important that we start the conversation.
As with any resource sector, the concern over environmental damage has become a huge concern for many next-generation investors. Be that as it may, we need resources to survive and, in some cases, we need resources to move away from fossil fuels. As an example, Palladium, Cobalt and other precious metals are used to reduce pollution or create electric vehicles. (we will look to do another segment in regard to mining and environment impact).Listen to our podcast interview with Garry Clark of 21C Metals on the mining basics.
Mining can be broken into 4 segments:
The early stages of the mining process are generally small organizations taking risk capital to prove an asset utilizing new ideas or technologies to prove the asset.
The development and production of mining assets are very capital intensive and is generally handled by larger mining organizations.Canada’s Junior Mining Corporations.
Prospecting and Explorations: Large areas of potential mineralized land are evaluated by airborne or ground-based surveys. Areas with strong showings or results are further explored. Exploration methods such as more detailed surveys, sampling, diamond drilling and trenching may be used to learn more about the deposit (e.g., size, shape, depth, etc.).
Asset Development: Feasibility studies assess the technical, legal and economic viability of developing the asset or deposit. Advanced exploration drilling programs are intensified to further increase the knowledge of the shape of the deposit and the characteristics of the orebody.
Canada’s Large Mining Corporations.Extraction: Construction of mining sites involves building roads, processing facilities, environmental management systems, employee housing, and other facilities. The two most common methods of mining are surface and underground mining. The method is determined mainly by the characteristics of the mineral deposit and the limits imposed by safety, technology, environmental and economic concerns.
The podcast interview with Garry Clark of 21C Metals suggested that a large majority of the market, 95%, are junior mining corporations trying to prove or develop assets for a larger organization to purchase.
According to Garry, the ratio of prospector/exploration corporations that can prove a mineable asset is about 50,000:1. This is staggering but clearly explains the mining market. Investing in junior mining is considered very high-risk in most cases and if 50,000:1 is correct, or even close, then it is, without doubt, a high-risk investment. However, it also explains why junior mining corporations can be so lucrative for investors. It’s not inconceivable for investors to see triple-digit returns if the junior mining corporation which you have invested in, is able to establish a sizeable asset and favorable economics.
One thing we did not cover is investment timelines and how growing environmental regulations are impacting resource economics.
I welcome you to listen to the complete podcast below. Garry provides simple but helpful highlights of the industry.
+ Follow: 21C Metals
Check out our mining clients