Exploration companies have the goal of discovering the mineral reserves of the future. These firms are often privately owned and are funded by venture capitalists , or by individual investors. They employ engineers, surveyors and cartographers in order to find mining locations. The discovery of a major mineral reserve can lead to the rapid growth of an exploration company because they will have access to capital for future development projects.
Mineral exploration companies are generally thought to be smalland medium-sized businesses with annual revenues less than $10 million. They are mostly privately owned and do not trade stock on an exchange. Information about them is therefore more difficult to access than other types of corporations. There are some publicly traded exploration firms.
The mining industry is a unique niche in the economy since it only begins production when new projects are discovered and put into production. Mineral companies can manufacture their products in short periods, unlike traditional manufacturing and service industries that produce their products on a continuous basis.
Exploration company earnings are dependent on fluctuations in the price of commodities due to their cyclical nature. Because of factors like Chinese economic expansion, weather conditions which can affect yields of crops, and the requirement for petroleum products to transport, commodities prices can fluctuate greatly throughout the year.
The revenue of exploration companies can vary greatly between years because of fluctuations in commodity prices.
Exploration companies generally struggle to raise capital during times of high demand for natural resources. They’re not only constrained in terms of revenue however they also have significant expenditures. Venture capital is much more common during these seasons, which could help keep exploration companies in business even as commodity prices increase.
Because of the nature of the industry, the majority of exploration companies aren’t publically traded.
The Mineral Exploration industry is closely related to other resource-based industries including oil and gas production, coal mining, and mining & metals. Most companies involved with mineral exploration also operate in other resource segments.
Diversification can help companies decrease their vulnerability to fluctuations in commodity prices because they do not depend on one type of resource. However, the differentiation between minerals is usually based on speculative-grade or inferred resources, which implies that there has been no drilling in the past.
A majority of companies need to perform further exploration work in order to convert speculative grades or inferred resources into indicated and measured resources or reserves as well as reserves. Both are necessary for mining activities. These kinds of tasks are often carried out by junior exploration companies that specialize in early-stage minerals exploration.
Exploiting mineral resources requires large upfront capital expenses that can be extremely risky for exploration businesses. There is no guarantee that they will discover valuable minerals. Once an ore body has been found the company may have to spend large sums of money on pre-production expenses including the design of the mine and acquiring the necessary supplies to produce for a long time.
It is crucial to weigh the costs of developing early against future revenue because it could take many years before the mineral resources can be developed into an operational mine. Many companies have partnered with larger firms who can finance high-cost projects to get them into production as part of this joint partnership. The benefit for junior exploration companies is that they have the ability to focus on early-stage mineral exploration while working with larger players that are capable of financing exploration and development.
The success of mineral exploration companies usually depends on their ability to raise capital or secure financing for projects from mining giants and/or financial institutions. Since it is able to finance the project’s first stages of exploration and development junior exploration companies require this source of capital.
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If an economic ore body is found and pre-production expenses can be fully covered, it may be possible to issue shares or go public in order to raise capital for the expansion or construction of a mine. If there is no demand for the shares of the company at any exchange of stock, it could decide to file bankruptcy or be taken over by a company that is mining exploration with more attractive prospects.
High-grade copper deposits are one of the most sought-after commodities in mining since they can bring in huge profits from small amounts of ore. Copper is mined from deposits of high-quality but low-grade with only 0.3 to 0.7 percent copper metal weight.
Mining companies may be classified as junior exploration companies or larger mining companies. They differ in the sense that the latter concentrates on large, capital-intensive projects which have resources with proven stable reserves (e.g. Bauxite production and alumina production) as opposed to those of the latter focus on exploration activities and highly-risky resources (e.g. gold and diamonds).