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How to Avoid Common Mistakes With Mining Stocks (Part 5: Funding Strength)

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A mining company’s past projects and funding strength are interlinked, and can provide clues as to its potential success.

A good track record can provide better opportunities to raise capital, but the company must still ensure it times its financing with the market, protects its shareholders, and demonstrates value creation from the funding it receives.

Part 5: The Role of Funding Strength

We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.

Part 5 of the series highlights six things to keep in mind when analyzing a company’s project history and funding ability.

Funding Strength

View all five parts of the series:

Part 5: Raising Capital and Funding Strength

So what must investors evaluate when it comes to funding strength?

Here are six important areas to cover.

1. Past Project Success: Veteran vs. Recruit

A history of success in mining helps to attract capital from knowledgeable investors. Having an experienced team provides confidence and opens up opportunities to raise additional capital on more favorable terms.

Veteran:

  • A team with past experience and success in similar projects
  • A history of past projects creating value for shareholders
  • A clear understanding of the building blocks of a successful project

A company with successful past projects instills confidence in investors and indicates the company knows how to make future projects successful, as well.

2. Well-balanced Financing: Shareholder Friendly vs. Banker Friendly

Companies need to balance between large investors and protecting retail shareholders. Management with skin in the game ensures they find a balance between serving the interests of both of these unique groups.

Shareholder Friendly:

  • Clear communication with shareholders regarding the company’s financing plans
  • High levels of insider ownership ensures management has faith in the company’s direction, and is less likely to make decisions which hurt shareholders
  • Share dilution is done in a limited capacity and only when it helps finance new projects that will create more value for shareholders

Mining companies need to find a balance between keeping their current shareholders happy while also offering attractive financing options to attract further investors.

3. A Liquid Stock: Hot Spot vs. Ghost Town

Lack of liquidity in a stock can be a major problem when it comes to attracting investment. It can limit investments from bigger players like funds and savvy investors. Investors prefer liquid stocks that are easily traded, as this allows them to capitalize on market trends.

Hot Spot:

  • A liquid stock ensures shareholders are able to buy and sell shares at their expected price
  • More liquid stocks often trade at better valuations than their illiquid counterparts
  • High liquidity can help avoid price crashes during times of market instability

Liquidity makes all the difference when it comes to attracting investors and ensuring they’re comfortable holding a company’s stock.

4. Timing the Market: On Time vs. Too Late or Too Early

Raising capital at the wrong time can result in little interest from investors. Companies in tune with market cycles can raise capital to capture rising interest in the commodity they’re mining.

Being On Time:

  • Raising capital near the start of a commodity’s bull market can attract interest from speculators looking to capitalize on price trends
  • If timed well, the attention around a commodity can attract investors
  • Well-timed financing will instill confidence in shareholders, who will be more likely to hold onto their stock
  • Raising capital at the right time during bull markets is less expensive for the company and reduces risk for investors

Companies need to time when they raise capital in order to maximize the amount raised.

5. Where is the Money Going? Money Well Spent vs. Well Wasted

How a company spends its money plays a crucial role in whether the company is generating more value or just keeping the lights on. Investors should always try to determine if management is simply in it for a quick buck, or if they truly believe in their projects and the quality of the ore the company is mining.

Money Well Spent:

  • Raised capital goes towards expanding projects and operations
  • Efficient use of capital can increase revenue and keep shareholders happy with dividend hikes and share buybacks
  • By showing tangible results from previous investments, a company can more easily raise capital in the future

Raised capital needs to be allocated wisely in order to support projects and generate value for shareholders.

6. Additional Capital: Back for More vs. Tapped Out

Mining is a capital intensive process, and unless the company has access to a treasure trove, funding is crucial to advancing any project. Companies that demonstrate consistency in their ability to create value at every stage will find it easier to raise capital when it’s necessary.

Back For More:

  • Raise more capital when necessary to fund further development on a project
  • Able to show the value they generated from previous funding when looking to raise capital a second time
  • Attract future shareholders easily by treating current shareholders well

Every mining project requires numerous financings. However, if management proves they spend capital in a way that creates value, investors will likely offer more funding during difficult or unexpected times.

Wealth Creation and Funding Strength

Mining companies that develop significant assets can create massive amounts of wealth, but often the company will not see cash flow for years. This is why it is so important to have funding strength: an ability to raise capital and build value to harvest later.

It is a challenging process to build a mining company, but management that has the ability to treat their shareholders and raise money can see their dreams built.

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Mining

The Biggest Salt Producing Countries in 2023

In this graphic, we break down global salt production in 2023. China is currently the top producer, accounting for almost 20% of output.

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Voronoi graphic breaking down global salt production in 2023.

The Biggest Salt Producing Countries in 2023

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Humanity has utilized salt for thousands of years, dating back to ancient civilizations. The U.S. alone consumes more than 48 million tonnes of salt per year.

In this graphic, we break down global salt production in 2023, measured in tonnes. These estimates come from the U.S. Geological Survey’s latest commodity report on salt.

Ample Supply

Salt is essential for human life, serving various purposes including food preservation, flavor enhancement, industrial processes, and health maintenance. The good news is that the world’s continental resources of salt are vast, and the salt content in the oceans is nearly unlimited.

China is currently the top producer of salt, with almost 20% of the output, followed by the U.S. (15%) and India (11%).

CountryProduction (tonnes)
🇨🇳 China53,000,000
🇺🇸 United States42,000,000
🇮🇳 India30,000,000
🇩🇪 Germany15,000,000
🇦🇺 Australia14,000,000
🇨🇦 Canada12,000,000
🇨🇱 Chile9,200,000
🇲🇽 Mexico9,000,000
🇹🇷 Turkey9,000,000
🇷🇺 Russia7,000,000
🇧🇷 Brazil6,600,000
Rest of world67,000,000
Global total273,800,000

The global salt market was valued at $32.6 billion in 2022.

It’s projected to grow from $34.1 billion in 2023 to $48.6 billion by 2030, with a CAGR of 5.2% during the forecast period. This suggests a surprising amount of growth for what is one of the world’s oldest and most common commodities.

Facts About the U.S. Salt Industry

In the U.S., salt is produced by 25 companies, which operate 63 plants across 16 states.

The states that produce the most salt are Kansas, Louisiana, Michigan, New York, Ohio, Texas, and Utah. Altogether, these states account for 95% of domestic production.

The primary uses of salt in the U.S. are highway de-icing (41%), chemical production (38%), and food processing (10%).

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