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 that 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 issuance of new shares.

Criteria to Define a Junior Mining Company

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 can mineral resource stocks in general be broken down into categories, but gold mining shares and 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 determine for themselves which category they feel most comfortable investing in. Generally, an investor in junior mining companies is exposed to more risks compared to investors in senior mining stocks. To limit the risk in investing in junior mining companies, I focus on those stocks with a healthy balance sheet and those that have already reported a mineral resource according to National Instrument 43-101 (NI43-101) or another international reporting standard.