Mineral Resource Stocks – Junior vs. Senior Mining Companies

Mineral resource stocks which have their shares listed for trading on a stock exchange, are often broken down into two categories: junior and senior mining companies.

The senior mining companies are the larger, more experienced companies which generate cashflow from their operations.

The junior mining companies focus their time, efforts and money on the discovery of new economic natural resource projects. The juniors derive their income from the issue of new shares.

The Following Criteria Define a Junior Mining Company1:

  1. It is neither a producing company nor the recipient of significant income from production or from some other business venture;
  2. Exploration funding does not come largely from accumulated cash flow from previous production or from the investment income from such funds;
  3. The exploration funds are not provided by a senior company that controls more than half the issued shares of the subsidiary company in question;
  4. The principal way of raising exploration funds is the issue of treasury shares;
  5. The company is not primarily an oil and gas producer, nor is it the exploration arm of a large company;
  6. It is not a government organization.

Not only the mineral resource stocks in general can be broken down into categories. The gold mining shares and the mineral exploration companies can be broken down into categories too. Please click on the links provided to find out more about these categories in detail.

Every investor in the resource sector must of course determine for themselves in which category they find themselves most comfortable investing in. Generally, an investor in the junior mining companies is exposed to more risks compared to investors in the senior mining stocks. To find out in which type of resource stocks I find myself comfortable investing in, I refer you to the note at the bottom of this page.

Note: For the junior mining companies, I limit myself to the undervalued junior mining companies with mineral projects which already have reported a National Instrument 43-101 (NI43-101) or to undervalued junior companies with oil and/or gas projects which already have reported a National Instrument 51-101 (NI51-101). Next to investing in these type of undervalued junior mining stocks, I will also invest in undervalued senior mining stocks.

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