If you consider investing in junior or senior silver mining companies, you should have a good idea of what these companies offer with regard to risk and value. In the area of senior mining, investors can look at income statements and balance sheets and make a fairly good judgment about the company’s value.
The situation is different with junior miners where buying silver stock requires looking at charts, the company’s properties, getting to know the management body, and so on. In many of these cases, there is no way of knowing whether a junior miner will make a discovery or not. Some investors just rely on their intuition, but experts recommend gathering as much information as possible. For example, it is good to know that the management body has performed well in exploration or the small mining field. Another indicator of a sound company is if its management had run or discovered a profitable mining site in the past.
Naturally, investors also want to look at the cash balance and cash flow of junior mining companies. While some of them may have good projects, if their burn rate is three hundred thousand per month, with just under a million in the bank, they will go broke in a couple of months. Unless they find additional financing, this is a likely scenario. One question to ask a junior miner is how long they will be able to stay in business if things do not pick up as expected.
Another important issue is whether the property or project they develop has any potential. Naturally, there is not guarantee that the estimates you get will match the actual quantities. It is possible that the management, financial controllers, and geologists promise more as to attract investors. While potential is one thing, especially on paper, exploration is not always feasible. For instance, even if drill results look promising, the region may not be accessible, and the costs to build infrastructure may be too high. The situation is different with senior mining companies. Senior miners are more experienced, larger mining companies that own and run existing mines. Given that their mining sites are already established, it is easier for investors to assess how well the miner is going to perform. A degree of consistency and fewer surprises follow from this when we speak of stock prices. Junior mining companies, on the other hand, have to identify different mining sites and explore their potential. There is always a risk that exploration will not result in actual discovery. This may be a costly initiative for junior mining sites and their investors. When a junior mining company opens a mine and begins exploitation, it will often sell the site to a larger and more experienced miner as to ensure higher returns. If the company does not have money to open the mine, however, this is a sure sign of financial losses.