Quantifying a mining investability quotient to mitigate junior mining investment risk

Jonathan Mickey Merguerian, University of Texas at El Paso


Uncertainty and risk are inherent features of investing in mineral exploration ventures. Investors rely on qualitative and quantitative analysis to evaluate risk of capital. The distinction between risk and uncertainty pertaining to mineral exploration is that risk is an opportunity for loss and uncertainty can be described as the range of probabilities that some condition may occur (Rose, 1987). Stakeholders rely on a combination of investment conferences, risk analysis equations, press releases, financial reports, and investment research to determine if an investment potential. J. M. Cozzolini developed a formula for Risk Adjusted Value (RAV) of an exploration venture. The study resulted in an equation that quantifies potential monetary gain specific to a company (Cozzolini, 1977). Prior equations are over simplified and provide no realistic outputs to rank the potential failure of a mining venture. The Fraser Institute releases an annual report that surveys mining companies that uses databases of sociological, political, and economic surveys to develop a Policy Potential Index (PPI). The PPI identifies risk based on national mineral potential, uncertainty concerning the interpretation of past regulations, uncertainty concerning environmental regulations, political stability, quality of geological databases and other mining pertinent information (Wilson, 2015). The existent methods can be improved with an equation that incorporates relevant parameters to compare among common class companies. The equation to rank these companies will be called the Mining Investability Quotient (MIQ). The MIQ will assimilate relevant equations, studies and ranking systems from prior studies to assess a mining venture. The quotient parameters are quantified based within financial access, legal authorization, current political system, geologic setting and potential occurrence, environmental preparation, metallurgic details, sociological consensus, and current commodity market trends and conditions.

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Recommended Citation

Merguerian, Jonathan Mickey, "Quantifying a mining investability quotient to mitigate junior mining investment risk" (2016). ETD Collection for University of Texas, El Paso. AAI10151208.