Mining Company
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
- 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)
- 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