How to evaluate a mining company - Bullion Barron's thinking

SilverSanchez · Nov 19, 2011

Bullion Baron said:

This is going to be a little rushed and straight off the top of my head, but thought it might be handy for beginners to list some of the questions I check answers for when researching a company. I don't specifically record the answer for each of these questions when researching, it's just some of the things I'm thinking about. Most of the questions here are pretty basic, there are more advanced ones which I might pop in this thread over time.

Management
What experience do they have?
How long have they been with the company?
What are they being paid?
How many of them are there (relative to size of the company)?
Are they looking after the little guy (e.g. SPPs instead of always doing insto placements)?
Are they marketing the company (e.g. investor presentations, conference appearances)?
Does management deliver what they say they will?

Resource
Do they have a resource? Does it comply with the JORC code?
What is the grade of the resource?
Is the resource spread over multiple deposits or one location?
Would the resource grade be profitable if mined?
Are resource upgrades expected?
Is there a large enough resource to justify plant/development costs?
How long has the company had the resource?
Has the discovery cost of existing resource been justifiable?
How many years worth of mining will their resource last?
Do they have reserves? Is it likely more of the resource can be converted to reserves?
What other minerals makeup the deposit that may also be of value if mining occurs (e.g. Silver, lead, copper credits may offset some production costs)?

Cash/Finance
How much cash do they have on hand? (check balance last quarterly then add any $ from placements, etc)
What rate of cash burn are they churning through? How long will their cash last?
If they have a significant cash balance, what are their plans for it?
Do they have any liabilities? Any outstanding accounts? Loans? Hedging?
If advanced explorer how will they fund development/plant costs?

Drilling Results
What drilling results do they have due soon?
What are the grades?
What is the strike length?
What is the depth?
Does it remain open/along strike?

Tenement/Project History
Has the project got a history of mining? Was it successful?
Have any companies gone into administration mining the same project? If so, what can the new company do avoid the same fate?
If not successful has the POG/POS risen enough to look at it again (keeping in mind mining costs may have increased)?
Do they own 100% of each tenement or only part of?

Production
What is the company's cash cost? Total cost?
What is their net profit? Earnings per share?
What is the project length based on production levels, current and projected (with existing resource)?
Are they meeting projected targets? If not, why not?
If they are exceeding targets, why? Is there room for further improvement along these lines?
Are they returning dividends to shareholders? Is this in their best interest or would they get more value reinvesting into further exploration?

Misc
What is the market capitalisation of the company?
How many listed shares do they have?
How many listed and unlisted options do they have?
What is the company's goals/motto/mission statement?
Do they keep market up to date with progress regularly?
What country are their projects in?

HOW DO ANSWERS TO THE ABOVE COMPARE WITH THEIR PEERS??

This is by no means a complete list (just those I can think of at the moment), but somewhere to start...
Click to expand...

... thought it diserved a bump...

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How to evaluate a mining company - Bullion Barron's thinking

SilverSanchez Active Member

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How to evaluate a mining company - Bullion Barron's thinking

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