[VIDEO] How-To: Gain Equity in the Mining Industry
Locating equity financing in the mining industry is no easy task. Companies usually generate little to no revenue which means exploration activities are typically financed by investors.
“Mining exploration companies typically raise capital by issuing new shares by way of Private Placements,” the video states. “Private placements allow mining companies to raise additional capital and can potentially provide investors with more upside and higher returns than investing in the same company in the public market.”
• How-To: Invest in Mining Stocks
• How to: Finance Mining Equipment
• SURVEY: Mining Industry Needs to Invest More in Automation
According to the video, there are three types of securities generally sold in a provide placement. These include: common shares, flow through shares, and warrants.
Common shares: These are the basic units of company equity. These shareholders have a vote in the election of the Board of Directors and carry the profit/loss risk.
Flow through shares: This offers the shareholder the same ownership rights as a common share, but also offers tax deductions to the investor holding them. Resource companies can “flow through” the mining exploration tax breaks they receive to these investors.
Warrants: Gives the shareholder the right, but not the obligation, to buy a common share at a certain price until a specified expiry date. Warrants have lower risk and provide additional returns if the share value increases.
[Source: VisualCapitalist]
