Junior's explorer value: see beyond intangibles.

The value of a junior can be assessed but is difficult to measure in its entirety. Apart from the accounting facts, market conditions have a lot to do with it since it is the market that will authorize the development of the potential project. Thus, without reference to an existing transaction, the appreciation of a Junior could result from an average value resulting from a consensus from a pool of analysts recognized as competent by investors.

With a conservative and objective view, the value at time 'T' of a Junior: it is either the price paid by the market for the company at time 'T', or the state of its "balance sheet" at time 'T'.

The fact to add a potential value of the resources implies that these resources have a market value and therefore we assume the project has a development potential which is, itself, subject to appreciation.

So ultimately are we still in a development perspective or do we also have to consider the risk of the failed project?

In my opinion, and in order to include the 'project risk', it is wise to consider an average value between a book value and a so-called development value. This also makes it possible to mitigate the risk of overweighting.

Then be careful the investment is risky. A junior is like a start-up. Return can be very attractive however you need to know where and to whom you provide your financing.

In addition you have to consider the significance of this juniors impacts. Many of them motivate their funding by the results of drilling. We have examples of projects whose management did not generate anything in terms of added value or positive impacts on the local economy, but on the other hand maintained an inappropriate presence in territories generating unnecessary environmental impacts.

You have understood the ESG approach is aimed at Junior's in an exercise upstream of the development of the project, i.e. the duty to question a matrix of double materiality and risk/impact. Some projects may prove to be inappropriate for considering future development. ESG engagement will contribute to the evolution of the mining sector and their downstream value chain.

ESG approach

Our approach is based on a methodology we developped based on GRI disclosures linked to SDGs.

The methodology is called eRR (ethore risk Rating)


The responsible investment approach taken by Ethore SA in the mining sector aims to provide analysis and relevant advices to enhance investment decisions in companies that have ethical and responsible development approach and act in a proactive way in regards of sustainability aspects.

The responsibility of an investment in mining stocks may have a significant impact on the adoption of best practices and standards. We know that the mining sector is marred by severe accidents due to risk management negligence, to unsatisfactory working conditions or inadequate technical procedures. This state of business is unsustainable and we can participate to its improvement.

The raw materials extracted by mining companies feed a growing world population. The dependence on new materials and other technologies go hand in hand with the increase in purchasing power of the middle class. These extracted materials currently supporting about 45% of economic activity in the world. In addition, the modern industry requires rare and minor metals, whose concentrates’ specificities must meet very high quality standards imposed by OEM's (Original Equipment Ma-nufacturers).

We believe ESG factors have to be implemented since the start of an exploration projet as it can impact the long-term risk and return profile of a company or a port-folios.

In order to enhance the interaction between Investors and companies, the eRR rating is completed by the transmission of a form dealing with SDG’s targets sent to companies. The question sheet collects the actions that have been taken and the assessment of these measures by management. This proactive approach aims to initiate monitoring of ESG factors within company management

ETHORE team analyse 228 indicators, including 151 ESG (Environmental, Social and Governance) criterias; relating to GRI (Global Reporting Initiative) .

eRR methodology comprises an ESG assessment based on GRI disclosures and linked to SDGs plus a technical risk assessment on mineral project developments.

We focus on one industry: the mining industry which comprises exploration companies or Junior's. We cover these Junior's while the major's are following up by the main ESG rating agencies. To better appreciate these external ratings, a consensus analysis is required.

The eRR rating model seeks to answer four key questions about companies:

  1. What are the most significant ESG risks facing a company ?

  2. How exposed is the company to those key risks ?

  3. How well is the company managing key risks and opportunities?

  4. How the company address and manage SDGs?

The answer comes from 1) identifying the risk, 2) evaluate the risk probability to occur, 3) estimate the risk impact level and 4) finally estimate the difficulty of detection.

ethore SA advises Juniors to adopt as soon as possible the GRI standard reporting.


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