After years of observing "junior" mining and energy companies, we can recommend this sector of investment only to experienced investors (with strong nerves!).

For inexperienced, "normal" investors, it is prudent to consult a certified financial advisor and portfolio manager or an investment bank. In the past, there have been a number of successful investments in this sector. However, at least as many that have lead to a complete write-off of the invested capital.

The reasons are easily explained
These kinds of projects, especially if listed on the stock exchange, are constantly looking for new investors by issuing shares or something similar, since they have an enormous need for capital. To make a mine operational, for example, a sum in the tens or hundreds of millions is normal. For a remote location, there are additional costs for infrastructure such as roads, electricity and water. For oil projects in the south Atlantic, the sums are more likely to be in the billions. And it's usually 5-15 years before a mine can begin operating – 5-20 years for oil projects. Raising capital requires a tremendous effort and leads to an increasing dilution of existing shareholders.

The shares are also not very liquid. The sale of a significant number of shares can lead to hefty price fluctuations, which affect all shareholders equally. The share price doesn't begin to stabilize until the projects are close to fruition, usually shortly before positive cash-flow is achieved. For this reason, it is often difficult to convert such a venture into cash.

A further reason why inexperienced investors should not invest here is the long set-up phase before a mine or oil production begins operating. In that time, a lot can change: the overall state of the economy, the price of commodities, local laws or internal problems of the projects. In certain circumstances, the progress of the project may suffer a great deal – even to the point of complete failure.

In this regard, a rating by HardFacts for a project is not a recommendation for investment and certainly not intended as guidance for investors for the purchase of shares.

The HardFacts rating is simply unbiased information about the strength of a project compared to similar projects in our database. The rating is only current at the time it is made. In its ratings, HardFacts values impartiality, clarity but also timeliness.

HardFacts and employees never invest in projects that are rated. All employees have signed agreements to that effect, which include severe penalties. This no-investment rule remains valid for 90 days following publication.