Mining
How to Avoid Common Mistakes With Mining Stocks (Part 2: Business Plan)
Everyone loves to talk about creating the next great mining business, but are they willing to put that talk into action?
There is real money and real management behind every company—but surprisingly, not every company has a concrete strategy to build a business and create value for shareholders.
Business Plan, or Lack Thereof?
Today’s infographic comes to us from Eclipse Gold Mining and it shows you how to avoid common mistakes when evaluating and investing in mining exploration stocks.
Specifically, we look at five ways that potential investors can detect the presence and viability of a mining company’s business plan.
Visit Part 1 of “Common Mistakes With Mining Stocks” on Team by clicking here
So, what should investors be looking for, when it comes to examining the business plan of a mining exploration company?
#1: Clear Vision vs. All Hope & Dreams
A company should articulate a clear vision rather just simply following the trends and hoping for the best. A long term vision for a business plan is critical as it will be guiding and reminding stakeholders of the company’s purpose through the thick and thin.
Signs of a Clear Vision:
- The company is actively reaching out to investors
- Projects can be profitable at today’s commodity prices
- Provide detailed timelines of work
- Funds committed to work
A clear vision in business will give the company a direction to aim for, allowing everyone to work quickly towards objectives.
#2: Sense of Urgency vs. Wait & See
Time is money, especially in mining. Companies need to build value fast to finance at higher share prices so that early shareholders do not get diluted. A company needs to make concrete decisions that drive towards value creation.
Signs of a Sense of Urgency:
- “Time is now” mentality
- Decisive actions
- Sense of purpose
- Solution-oriented thinking
It is expensive to maintain a company, especially one that does not yet produce income. Expenses add up quickly and that is why management needs to make sure they focus their efforts and money on activities that generate value for shareholders.
#3: Laser Focus vs. Spray & Pray
The mineral exploration business is tough and each project requires the undivided attention of managers. Smart companies maintain incredible focus to de-risk their projects while others spread themselves thin with multiple projects.
- Properties with a focused vision towards production
- Specialized management experience aligned with the project
- Aligning management skill sets with each phase of a project
Signs of a Laser Focus:
In order to assess whether a company has the right focus you have to see whether the company is aligning its human assets with its physical assets and a goal in mind.
This focus will help to clarify the story for investors.
#4: Tell the Story vs. Hiding Behind the Science
Communication and business acumen are the key to take a project to market. Mining requires massive amounts of geological knowledge, but that is not the investor’s job to handle. They do not want to want to know the subtleties of geochemistry—they just want to know whether they can make money from those rocks.
Companies that hide behind a wall of geological slides may not have not a real story to tell, and they may be pulling investors into funding their own science projects. At the same time, investors need to make sure that the data being presented matches the story being told.
Signs of Telling the Story:
- Aware of risks, and communicating those risks
- Clear understanding of local geology
- Data from drill results back up the story
- Consistent message
If a company cannot communicate effectively, how are they going to deal with other, more complicated aspects of a mining business plan?
#5: Endgame in Mind vs. Kicking the Can Down the Road
A journey begins with a single step, but without a business plan and commitment, there will never be an end in sight. Quality companies foresee how their project will come together to generate both liquidity and an exit plan for shareholders. There are several clues investors can use to tell if a company is moving towards its goals.
Signs of the Endgame in Mind:
- List of accomplished goals
- Clear vision of future goals and exit strategy
- Plan for liquidity events for shareholder
The goal in investing is to make money. If shareholders are not making money, what is the point? If a company has no plan, it has no hope.
Making the Right Decisions
Understanding the characters that create value for mining companies is the first step, and the second step is assessing whether there is a viable business plan at hand.
While the risks are high, an effective plan is the first step towards reducing risks and providing shareholders with value.
Uranium
Charted: Global Uranium Reserves, by Country
We visualize the distribution of the world’s uranium reserves by country, with 3 countries accounting for more than half of total reserves.
Charted: Global Uranium Reserves, by Country
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.
There can be a tendency to believe that uranium deposits are scarce from the critical role it plays in generating nuclear energy, along with all the costs and consequences related to the field.
But uranium is actually fairly plentiful: it’s more abundant than gold and silver, for example, and about as present as tin in the Earth’s crust.
We visualize the distribution of the world’s uranium resources by country, as of 2021. Figures come from the World Nuclear Association, last updated on August 2023.
Ranked: Uranium Reserves By Country (2021)
Australia, Kazakhstan, and Canada have the largest shares of available uranium resources—accounting for more than 50% of total global reserves.
But within these three, Australia is the clear standout, with more than 1.7 million tonnes of uranium discovered (28% of the world’s reserves) currently. Its Olympic Dam mine, located about 600 kilometers north of Adelaide, is the the largest single deposit of uranium in the world—and also, interestingly, the fourth largest copper deposit.
Despite this, Australia is only the fourth biggest uranium producer currently, and ranks fifth for all-time uranium production.
Country | Share of Global Reserves | Uranium Reserves (Tonnes) |
---|---|---|
🇦🇺 Australia | 28% | 1.7M |
🇰🇿 Kazakhstan | 13% | 815K |
🇨🇦 Canada | 10% | 589K |
🇷🇺 Russia | 8% | 481K |
🇳🇦 Namibia | 8% | 470K |
🇿🇦 South Africa | 5% | 321K |
🇧🇷 Brazil | 5% | 311K |
🇳🇪 Niger | 5% | 277K |
🇨🇳 China | 4% | 224K |
🇲🇳 Mongolia | 2% | 145K |
🇺🇿 Uzbekistan | 2% | 131K |
🇺🇦 Ukraine | 2% | 107K |
🌍 Rest of World | 9% | 524K |
Total | 100% | 6M |
Figures are rounded.
Outside the top three, Russia and Namibia both have roughly the same amount of uranium reserves: about 8% each, which works out to roughly 470,000 tonnes.
South Africa, Brazil, and Niger all have 5% each of the world’s total deposits as well.
China completes the top 10, with a 3% share of uranium reserves, or about 224,000 tonnes.
A caveat to this is that current data is based on known uranium reserves that are capable of being mined economically. The total amount of the world’s uranium is not known exactly—and new deposits can be found all the time. In fact the world’s known uranium reserves increased by about 25% in the last decade alone, thanks to better technology that improves exploration efforts.
Meanwhile, not all uranium deposits are equal. For example, in the aforementioned Olympic Dam, uranium is recovered as a byproduct of copper mining occurring at the same site. In South Africa, it emerges as a byproduct during treatment of ores in the gold mining process. Orebodies with high concentrations of two substances can increase margins, as costs can be shared for two different products.
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