Commentary: China Needs Its Own Capital Market for Mining Startups

China must do more than just acquire overseas mines to secure its mineral resources; it needs a robust mechanism to discover new resources by enhancing early-stage exploration capabilities. Beijing has recognized mineral resources as strategically critical, akin to food security. However, to actualize this priority, China should establish a capital market specifically for the high-risk, early phases of mineral development—namely, exploration[para. 1].

The greenfield mining process, which involves building new projects from scratch, is lengthy and complex. The stages include discovery, resource estimation, feasibility studies, permitting, financing, construction, and eventual closure. Exploration and related studies constitute the majority of this process, taking an average of 11.9 years out of a 15.7-year development cycle, compared with only 1.5 years for financing and permitting and 2.3 years for construction, according to S&P Global. Notably, this timeline is increasing, with projects completed between 2020 and 2023 taking 17.9 years compared to 12.7 years for those launched between 2005 and 2009. The early stages are also the most costly and risky, often requiring hundreds of millions of dollars with no guarantee of success[para. 2][para. 3].

Globally, the riskiest exploration work is taken on by “junior mining companies,” which focus on exploration and feasibility studies and typically remain unprofitable, sometimes for a decade or more, operating with negative cash flows. In China, a comparable function is performed by state-funded “thousand teams” under geological bureaus, but these rely on government funding—a model deemed unsustainable and inefficient. Internationally, junior miners raise capital through stock markets, making them key engines of mineral discovery and generators of risk capital[para. 4][para. 5].

Junior miners are highly responsive to market trends, quickly adapting to surges in demand for specific minerals like lithium or rare earths, and frequently switching focus as markets change. Their agility allows them to drive most new mineral discoveries, particularly from greenfield operations. Canadian and Australian stock markets, which host the majority of the world’s junior miners, play a central role by providing the capital market infrastructure needed to support their growth, unlike China, where no such environment exists. This gap limits China’s ability to discover and control new mineral deposits[para. 6][para. 7].

The value of junior mining companies is not reflected in traditional financial metrics, given their lack of profits or revenue. Rather, value comes from updates on exploration progress, drill results, and resource estimates. Their business model resembles pharmaceutical R&D, with years of cash burn before meaningful results—regulatory approval in pharma, a mining permit in mining[para. 8].

A global model for junior miner finance exists in Canada’s TSX/TSXV and Australia’s ASX, which host 70–80% of over two thousand junior miners worldwide and provide the bulk of funding for greenfield exploration. Even Nasdaq is now attracting some junior mining listings. While Hong Kong’s stock market offers a partial model through Chapter 18 rules, it still isn’t wholly suited to pre-revenue explorers. However, it does support similar high-risk sectors such as biotech, suggesting that developing a junior mining board is feasible[para. 9][para. 10].

Significant domestic capital is interested in junior mining, but a lack of a dedicated exchange prevents efficient matching with projects. Implementing a junior mining board in China requires three steps: (1) clear listing and disclosure rules that could be modeled on Canadian and Australian systems; (2) leveraging China’s robust pool of professionals and consultants; and (3) nurturing a dedicated investor base familiar with mining industry risks[para. 11][para. 12][para. 13][para. 14].

Given soaring global prices for gold and copper and the growing value of Chinese mining companies, the timing is ripe to complete China’s capital market infrastructure for mineral exploration, paving the way for a new era of domestic mineral discoveries[para. 15].

This commentary is by David Bo, independent non-executive director of Zijin Mining Group Co. Ltd., adapted from remarks delivered at the China Minmetals Industrial Finance Forum in Shanghai[para. 16].