If it isn't grown, it has to be mined. You've probably heard some variation of this saying. It is used by people concerned about the environmental effects of mineral depletion, as well as people bullish on mining stocks.

Although these two groups have a very differe൩nt emphasis when they speak it, they are both right; mining is big business. Almost every commercial product has elements that started off buried beneath the earth.

Here are a few things that you🐓 should know before adding mining stocks to your portfolio.

Two Groups, One Sector

Mining stocks are truly two distinct groups: majors and juniors.

The majors are well-capitalized companies with decades of history, world-spanning operations, and slow and steady 澳洲幸运5开奖号码历史查询:cash flow. Major min✱ing companies are no different from large oil companies, and many of the same metrics apply with a mining twist.

Both have proven and 澳洲幸运5开奖号码历史查询:probable reserves, except mining companies break down profit and cost on a given deposit by the ton, instead of the barrel. In shoಌrt, a mining major is easy to evaluate and easy to invest in.

The junior mining stocks are very nearly the exact opposite of mining majors. They tend to have little capital💦, short histories, and high hopes for huge returns in the future. A junior company is essentially a smaller or newer company that is developing or seeking to develop a nꦰatural resource deposit or field.

For the ju🔜niors, there are three possible fates.

1. Most common is a failure, which leaves a hole in everyone's pocket, including that of the banks and investors.
2. The second fate occurs when a junior has enough success to justify a major paying a decent premium to gobble it up, leading to decent returns all around.
3. In the third and most rare fate, a junior finds a large deposit of a mineral that the market wants a lot of; it is a magical combination of the right deposit at the right time. When this happens, juniors can return more in a few days than a major will return in years.

Valuing Major and Junior Mining Stocks

Although majors and juniors are very different, they are united by the one fact that makes all mining stocks unique: their 澳洲幸运5开奖号码历史查询:business model is based on using up all the assets they have in the ground. The catch is that 𝓡mining companies don't know exactly how much is in a given deposi𝕴t until it is all dug up.

Therefore, the value of a mining stock roughly follows the market value of its reserves, with a pꦉremium paid to companies with long histories of successfully bringing those reserves to market.

Reserves are evaluated through feasibility studies. These studies independently verify the worth of a deposit. A 澳洲幸运5开奖号码历史查询:feasibility study takes the estimated size and grade of the deposit and balances it against the costs and difficulties of extracting it all. If the deposi🥀t will fetch more money on the market than it costs to dig up, then it is feasible.

Different Risks, Different Rewards

If a mining major has hundreds of deposits staked or being mined, the contents of any single deposit aren't likely to shake the 澳洲幸运5开奖号码历史查询:stock value too much. A major ✱is the sum of all the deposits with the aforementione♑d goodwill tied to history.

A change in the market value of a mineral that makes up a larger percentage of the deposits will have a much larger effect than a new deposit or a failed deposit. A junior mining stock lives or dies on the results of its feasi🌳bility studies.

A junior mining stock typically sees the most action leading up to, and immediately after, a feasibility study. If the study is positive, then the value of the company may shoot up. The opposite, of course, is also true. Often, a junior miner won't mine a feasible deposit to the end.

Instead, they sell the deposit (or themselves) to a larger miner and move on to search for another one. In this sense, junior mining stocks form an exploration pipeline that feeds the major miners in the end. In this✅ vi𝓀ew, the big risks and rewards mostly reside at the junior mining level.

Choosing How to Invest

As an aspiring mining investor, you're probably wondering whether you should invest in junior mining stocks or major mining stocks. The answer depends on what you are looking for. Juniors have the potential to offer a lot of appreciation in the right market.

This makes them an ideal destination for 澳洲幸运5开奖号码历史查询:risk capital, but hardly the best place to put your Social Security checks. If you are looking for a lower-risk stock with the potential for dividend♚s and some decent appreciation, then major mining stocks may be for you.

The Bottom Line

This is a primer and as such, suffers from being overly broad and simplistic. Before you invest in the 澳洲幸运5开奖号码历史查询:mining sector, you should probably know what greenfield exploration is, as well as how to estimate the impact of pricing risk and be able to hold forth on the dangers of buying on a single positive assay.

If you are interested enough in mining to do some research, then there is probably room in your portfolio for both mining majors and juniors. For those who would prefer to get investing 澳洲幸运5开奖号码💯历史查询:exposure to the greater mining sector (rather than pick individual s🔥tocks), there are several mining-related ETFs and mutual funds available that could be added to your portfolio.