Mining companies: from prospectors to majors

The main types of company

Around them sit service companies: drillers, assay labs, engineering firms, contractors and equipment makers. They earn fees whether or not a project succeeds.

Juniors and developers

A junior explorer usually has no revenue. It raises money, spends it on drilling and studies, and tries to make the project worth more than the money spent. Its value is mostly an option on a discovery becoming a mine. Most juniors run one to three projects with a small team, and many outsource the geology and drilling.

A developer is a junior that has reached the studies, permitting and financing stage. It has a bigger team and much larger costs, and faces one central choice: build the mine itself, or sell it to someone who can.

Mid-tier producers

Mid-tiers run one or a few mines and are usually focused on growth. They are often the most active buyers of mid-size projects, because a deposit too small for a major can double a mid-tier's production. Some juniors become mid-tiers by building their first mine; that path is rare and risky, but it is where the largest returns in the sector have often come from.

Major miners

Majors are large, usually global companies running portfolios of big, long-life mines. They split broadly into:

• Diversified majors: several commodities, such as copper, iron ore, coal and nickel.
• Focused majors: one main commodity, for example the largest gold or copper producers.

What drives a major:

• Replacing reserves. Every tonne mined depletes the asset base. A major has to find or buy new reserves just to stand still.
• Scale. A small deposit does not move a large company's earnings, so majors look for large, long-life, low-cost assets. Analysts often call these "tier-one" assets, although definitions vary.
• Capital discipline. Shareholders expect dividends and buybacks as well as growth, so every new project competes for capital.
• Jurisdiction and reputation. Majors are cautious about country risk, community relations and environmental standards: see the jurisdictions track.

Majors explore, mostly near their existing mines, but they get many new projects by taking stakes in juniors and buying the ones that prove up. See how major miners acquire projects.

A worked example: why majors must buy

An invented gold major produces 2 million ounces a year and has 20 million ounces of reserves: ten years of mine life.

If it does nothing, its mine life shrinks every year and investors value it lower. That steady demand from producers is what ultimately pays for successful junior exploration.

Royalty and streaming companies

These companies do not operate mines. They pay upfront for a share of a mine's revenue (royalties) or the right to buy part of its output at a low price (streams). With a portfolio of many interests and few staff, they have high margins and no direct exposure to operating or construction costs, but they depend on the operator.

State-owned and strategic investors

National mining companies, sovereign wealth funds, and buyers linked to smelters or end users invest for supply security as well as return. They can pay more, accept longer timelines or invest in places others avoid, and they are increasingly important for metals seen as critical.

How the market values each type

How they fit together

A typical project might pass through all of them: a prospector stakes the ground and options it to a junior for shares and a royalty; the junior makes a discovery and sells a stake to a major; a royalty company funds the PEA; the project is sold to a mid-tier, which arranges a stream and project debt to build the mine. Each player takes the risk it is best placed to carry.

What to take away

Know which kind of company you are looking at, because it decides how it makes money, how it is funded and how it is valued. For a junior, the most important question is often who the eventual buyer will be.

All figures are invented for illustration. This is educational material, not investment advice.