The attractiveness of juniors in the mining industry

The mining industry is an interesting, yet complicated industry. Mining is very important for the production of all kinds of products. It is a capital intensive industry that requires large and long term investments. In addition to the initial capital required for construction and development of a mine, on-going capital has to be spent on the mine throughout the lifetime of its operations. The industry has undergone a lot of changes through the last decade, with the emergence of China and boom in commodity prices as the most important developments. RoyalHaskoningDHV acts as an advisor to primarily financiers and lenders for junior mining companies and wants to increase its services to these clients. Therefore the aim of this research is to answer the following question: To what extent does the financial structure of a junior mining company affect its potential attractiveness of a takeover target by a major mining company? In order to answer this question, the research question was divided in four sub questions. The first focused on the companies of which the mining industry is comprised. Related to this, the life cycle of a mineral project is discussed. The second sub question addresses the types of finance available to the mining companies. It also looks at the risks related to mining projects. The third sub question discusses the relevance of the financial structure of mining companies in the case of a takeover. First it discusses the developments regarding the finance available to mining companies and later on the developments in mergers and acquisitions and the important factors for major mining companies when they are eyeing a takeover. The fourth and last sub question addresses the most important current trends in the mining industry, with a focus on the increasing presence and activity of Chinese companies. The sub questions were answered using information obtained through scientific papers, books specializing in the subjects of mining and finance, accountant reports, news reports about the mining industry and especially through interviews with experts from the different disciplines of the industry.