Investment opportunities in the mining industry

In today’s IRMatters post, Morgans Financial director Roger Leaning discusses investment opportunities the wealth management firm evaluates in a mining company when advising clients.


Roger Leaning

Are you eyeing a potential investment in a mining company? Some experts say risks are high but the gains can be sizable. That’s why it’s important to be aware of the industry’s nature and related risks before jumping in.

When giving investment advice to clients, Morgans weighs a mining company’s people and structure, opportunity and investment proposition. Never underestimate the power of a well-made decision. Read on to learn more about the three main aspects for consideration.

People and structure

Morgans makes an overview of the mining company, its board and management as well as key shareholders. The miner’s capital structure is gauged, such as its financial resources, liquidity and pre- and post-raising. Its track record in exploration, development or fiscal discipline is also taken into account.

Opportunity

Morgans determines the commodity being obtained, its resource and quality. The parameters of the exploration or mining endeavour is also identified.

For the project’s location, the kind of infrastructure, services and sovereign risks related are sought out. The mining activity’s current and proposed work programs are checked, as well as any milestones.

Morgans examines the capital expenditures and operational expenses connected with the undertaking. The project timetable is assessed to ensure the stages necessary to move the venture to a successful conclusion have been identified and are being managed.

Moreover, the objectives of the project and the strategy towards executing it are clear. Morgans notes that this in-depth analysis of the people, company and project allows it to obtain a clear understanding of the competitive advantage of the opportunity, if it exists.

In relation to the commodity market outlook, Morgans verifies the supply and demand for the commodity as well as its price trends.

Investment proposition

When it comes to the miner’s investment proposition, Morgans essentially looks to answer the following question… Why do I need to invest now? This mainly refers to the urgency to invest before the opportunity disappears and considers the timing, likely outcomes and activity needed to achieve. It will also need an assessment of the offer structure and proposed value. Morgans notes that it will likewise attempt to overlay an ever-changing intangible market sentiment to the investment proposition. This may consider things such as fund flows into the resources sector, recent activity and general levels of investor support, alternative or competing investments and potential gate keepers.

Need further help on your impending investment decision?

Get in touch with your Morgans Adviser for some assistance on your prospective move. Alternatively, if you do not have a Morgans Adviser, call 1800 777 946 or email info@morgans.com.au.

Important Information: The material contained in this article is for general information only. It does not take into consideration any specific needs, situations or objectives. Before making any financial decision, you should make sure you are comfortable that the strategy suits your needs and objectives, and your risk profile. If necessary, you should seek professional advice.