What is a junior business?
A small business is a small business that develops or seeks to develop a deposit or field of natural resources. A small business is like a startup in that it is looking for funding to help it grow or is looking for a much larger business to buy it.
Understanding the Junior Enterprise
Junior companies are generally small capitalization, with a small market capitalization (generally less than 500 million) and have low daily trading volumes of 700,000 and less. They are most likely found in the exploration of raw materials, such as petroleum, minerals and natural gas. Small businesses are seen as attractive businesses for those who can afford to take the risks associated with them.
Costs involved in starting a junior business
The cost involved in starting a junior business has increased considerably, but so too has the reward for success.
The first thing many juniors will do is acquire properties they believe have a high probability of resource deposits. The company will then conduct a resource study. Once completed, it will provide the results to shareholders or the public to prove that there are assets available. If the study is successful, the small business will raise capital to continue exploration or partner with a larger company to reduce costs. In some cases, it may also attempt to be acquired by a larger company.
Characteristics of small businesses
Many of the smaller companies are venture capital firms looking for financing for their own operations. For example, a small gold company may not own its mining operations. Instead, he can seek capital to undertake this part of the business.
Young companies also carry a lot of risks. If the company undertakes exploration work and finds no resources before the debt becomes due, it will suffer financially and may have to declare bankruptcy.
Juniors are also sensitive to commodity prices, which means that their stock prices fall directly in line with the commodity with which they are associated. Thus, the prices of junior gold stocks will be affected by the price of gold, just as junior oil and gas stocks will be affected by energy prices.
Juniors will have management teams who will provide some expertise in the field of exploration and will be able to navigate all local government and environmental regulations. Companies will also have highly qualified staff, including engineers and geophysicists, so that when properties are promising, they can help produce resources.
Investing in juniors
Investing in junior companies often carries more risk than larger, more established companies. Indeed, the juniors can still explore and, sometimes, find no resources. Investors who are interested in small, emerging businesses like these should remember to diversify to minimize their risk and get the maximum return on their investment.
A greater degree of interest in the juniors will generally come from individual investors, as they generally invest on an emotional basis. Institutional investors, such as mutual funds or hedge funds, will normally invest in top tier companies with a higher track record.
The best places to find juniors are the Toronto Stock Exchange (TSX) and the TSX Venture Exchange. Both have hundreds of listed mining companies.
Examples of junior companies
As mentioned above, hundreds of mining companies are listed on the TSX and TSXV.
Nexus Gold, headquartered in Vancouver, Canada, is an example of a junior mining company. As of June 11, 2020, the company had a market capitalization of $ 5.2 million, with a daily trading volume of approximately 49,000. The company is listed as an exploration and development company with operations in Burkina Faso , in West Africa, and has three projects, including the Bouboulou project.
Delphi Energy, a Calgary company, is a small energy company. As at June 11, 2020, its market capitalization was $ 160 million and its daily trading volume was approximately 55,000. Delphi developed its Montney property in the Bigstone deep basin, which is in the northwest of the ‘Alberta, Canada.