Entity Types

Mining companies mine raw commodities like coal, metals and precious metals.

Mining Company Capital Requirements
  • Mining is a capital intensive business
  • Companies usually need to raise additional capital to bring on new projects and increase production
  • Mining companies tend to cut capital expenditures and scale back production when commodity prices are low

Mining Company Cyclical Price Fluctuation
  • The price of mining companies tends to fluctuate along with the commodity cycles
  • When commodity prices rise, mining company share prices tend to increase rapidly (costs are generally fixed, so margins improve)
  • When commodity prices fall, mining company share prices tend to decrease rapidly (costs are generally fixed, so margins weaken significantly)

Mining Company Valuation
  • Because the mining business is cyclical and sales/earnings can fluctuate rapily traditional P/E or P/S are not as helpful
  • The P/B (price to book) Ratio may be more helpful