The Benefits of De-risking for Junior Mining Companies and Their Investors

Minimizing risk or external variables that could disrupt mining project exploration and development just make sense. Especially for junior mining companies, “de-risking” a project by conducting extensive exploration work, appropriately financing the project in the short-medium term, and conducting work to lower the production costs on the property all work to set these emerging players ahead of the competition.

Junior companies and their prospective investors stand to gain incredible economic and exploration upside when active de-risking steps take place. Proactive problem solving, strategic positioning and de-risking best practices provide investors with a better opportunity to profit and instill junior companies with more confidence to become a notable name in the industry.

What does it mean to de-risk for a junior mining company?

De-risking occurs when a junior mining company applies thorough analysis and extensive strategic project planning to help attract investors into seeing the profitability of their project. At different stages in development, junior companies help stakeholders understand the status of the current project, the risks associated at every level and how the company has taken proactive steps to reduce these risks.

Conducting extensive resource exploration

A project’s resources often are the main selling point for investors. To demonstrate the attractiveness of a project, miners can show maps, trenches, samples, drill locations and historical results from previous projects and highlighted results from current operations.

Outlining technical aspects of a project by providing investors with information like a NI 43-101 or JORC resource, instills more legitimacy in a prospective project and confidence in investors that there is investment upside given the resource evidence provided.

Obtaining project financing

Financing helps to get each stage of project development rolling. With adequate funding and securing the right financing package, junior companies present themselves as a lower-risk investment for potential investors. When looking into investing in particular companies, investors should consider their entire financial position, including shareholder structure, market capitalization and ability to fund a project.

Lowering development costs

The techniques and fieldwork a company conducts functions to reduce production costs later on in the process. Investing in time-efficient and advanced technologies to improve mining capabilities can cut costs at many levels of development. Companies can also invest in analytics to assess the costs of their processes and identify strengths and weaknesses.

When junior companies employ this de-risking strategy, they demonstrate to potential investors expert planning abilities and attractive project management that stand to provide high returns as the project develops.

Choosing a mining-friendly jurisdiction

Ensuring the stability of a jurisdiction stands as one of the most notable de-risking strategies for mining companies. A safe jurisdiction carries less risk than a cheaper one, which serves both the company and investor better in the long term.

A stable government environment, excellent infrastructure and supportive regulatory aspects all work to create ideal conditions for mining and exploration. With strategic positioning in a mining-friendly location, junior companies also stand to experience fewer disruptions from socio-political strife or complications from surrounding political or economic landscapes, adding to the efficiency of project development at every stage.

Selecting the right management team

A strong management team does not only boast experience in mining and exploration but in de-risking strategies to maximize the profitability and attractiveness of their projects. This valuable attribute also extends to the company’s technical capabilities, capital market expertise and financing experience. Researching the right people creates a more well-rounded team that primes the company for success and growth as a junior player to a dominant name in the mining space.

Benefits of de-risking resource exploration and development projects

There are significant risks associated with mining projects. However, as a company moves through the lifecycle of the project, the risk associated decreases accordingly. These lifecycle stages include concept, pre-discovery, discovery, feasibility, development, start-up and depletion. Making sure to de-risk works in favor of the mining company and investor, no matter the stage of development.

Employing de-risking best practices and proactive action in increasing the profitability of a project ensures confidence throughout production and development timelines. With fewer variables to consider and fewer disruptions to mining operations, investors lower negative impact, lower risk and higher economic advantages investing in a junior company.

Examples of companies successfully de-risking junior company projects

Denison Mines (TSX:DML,NYSEAMERICAN:DNN) has shown steps to de-risking its Phoenix uranium deposit by achieving an independent “proof of concept” study for the ISR mining method being used. Denison also completed additional financing of US$56 million, which the company expects to fully pay for future feasibility studies and environmental assessments associated with that location.

Mason Graphite (TSXV:LLG,OTCQX:MGPHF) is another example of a de-risked junior mining company. In Mason’s case, Quebec’s provincial government allocated $400 million to improve access and infrastructure to the company’s Lac Gueret South project in anticipation of increasing demand for battery metals like graphite. Add to that the established production from nearby properties like Berkwood Resources (TSXV:BKR,OTCQB:CZSVF), and it becomes clear why proven output and access to infrastructure are strong signals that a junior mining company is de-risked.

Straightup Resources (CSE:ST) boasts a world-class management team with over 70 years of combined experience in the mining industry. Its current projects leverage strategic positioning in prolific jurisdictions like Ontario, Canada Red Lake mining district. These locations also present a stable political environment, excellent infrastructure and a proven track record of producing gold since its inception in the late 1920s.

With extensive proactive and strategic planning and expected review of historical data, geological mapping and sampling, StraightUp stands as a prime example of expertly de-risking its current mining projects for immense investor upside potential.

Takeaway

Junior mining companies that implement de-risking practices demonstrate to potential investors they understand and are well equipped to deal with the issues and risks faced in mining projects. Companies who are de-risking now are getting the chance to practice and perfect the standard, presenting investors with an opportunity to support companies that are at the forefront of the industry.

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