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'dilution ~ The Biggest Risk In Mineral Exploration: Dilution ~ mining'

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Chitra Ghosh is a specialist writer on junior mineral exploration companies. The views expressed herein are solely and exclusively those of the author of this article. Email Ms. Ghosh at: info@momentumgain.com. Website: www.networkexploration.com' title='www.networkexploration.com' target='_blank'>www.networkexploration.com

"....In practice, however, proceeds from shares sold are spent on useless experimentation and head offic..........dilution, mining, exploration, risk, arbitrage....."
Equity issues invariably form an integral part and parcel of a corporation’s growth cycle. Take hundreds of junior mining companies as a classic example: exploration exercises, triggering repeated issuance of shares, have causal so much dilution that shareholders can only look tend to nominal returns (if any) even if a resource is in the event of identified in accordance with industry standards.

The dilution rate is an expression of the ratio of new shares issued for each prevalent share on a corporate brochure at any given point in time. But they also result in dilution for extant shareholders, and too much dilution repeatedly turns a crafted investment profile upside down. In practice, however, proceeds from shares sold are spent on useless experimentation and head office costs; particularly in the case of an exceptionally bulky number of juniors, also rather presumptuously called “growth corporations”.

As history proves, exploration can lead to windfall profits for shareholders. In theory, dilution should be accompanied by substantial enhancement in shareholder evaluate along a pre-determined timeline. “Our benchmark is to work with managements who are willing to walk away from an exploration target if the facts so warrant, and then to quickly move on to greener pastures.”

It is indeed subtile to find a mining junior acknowledging publicly that an exploration program has failed. “The trick is to discover operations which can find the balance amongst new equity and sensible, fact-driven exploration schemes,” a European asset pool advisor highlighted in a recent client circular. And, given the low market capitalization of the bulk of junior companies, fresh equity can only be placed at prices which significantly dilute shareholders on record.

Therefore, to warrant dilution in an exploration context, there are some fundamental thresholds which must predominance the quest for value. On the contrary, geologists keep providing fodder for press releases which are conditioned by highly technical intimation and which, in most instances, essentially hide more than they disclose. Should on-ground joint ventures be actively encouraged in the object stages of the exploration process?

Finally, exploration need only be undertaken in regions with a proven over of generating sizable mineral reserves, with above-average concentration levels. For one, investors should remember that, in general, any well-structured exploration proposal will suggest the occupancy of one mineral or another in a bulky underlying property; but will the potential resource ever lead to profitable mining? Another criterion is the use of a “drop dead” budgetary ceiling; at what stage, and under what conditions, will the money-tap be turned off? Juniors must also confront the challenge of diversifying risk on a continuous basis, without creating dilution scenarios. Without access to that information, you are better advised to keep your stock in the bank./

Note: Dilution ratios are computed based on data obtained from corporate filings. There is little point in being a pioneer—at least not with other peoples’ money--in a longitude where there are any numbers of “safer” bets, pertinently speaking.

Prior to investing in a mining junior, investors owe it to themselves to be aware of one critical piece of information: the dilution ratio.

"..... You may also contact the author for a calculation format at the email address provided below. You may also contact the author for a calculation format at the email address provided below....'

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Unique Free Article: 'dilution ~ The Biggest Risk In Mineral Exploration: Dilution ~ mining'

Unique Free Article:
'dilution ~ The Biggest Risk In Mineral Exploration: Dilution ~ mining'