An exploration firm is a firm with the aim of locating new mineral deposits. They are usually privately owned and financed by venture capitalists or private investors. They employ geologists, engineers as well as surveyors, cartographers or other experts to locate places to extract minerals. The discovery of a significant mineral reserve can lead to the rapid growth of an exploration business since it will have access to capital for further development activities.
Mineral exploration companies tend to be small- or medium-sized enterprises with annual revenue less than $10 million. They are mostly privately owned and do not trade shares on an exchange. They are therefore less accessible as compared to other kinds of corporations. However, there are a few publically traded exploration firms.
Since production begins only once new projects are identified and put into operation, the mineral exploration industry is a niche of the economy. Mineral companies are able to produce their products in short intervals, which is different from traditional service and manufacturing industries that manufacture their goods continuously.
Due to the cyclical nature and nature of the industry, exploration company revenues are extremely susceptible to price fluctuations for commodities. Because of factors like Chinese economic growth, weather patterns that impact crop yields, and the demand for petroleum products for transport, commodity prices can fluctuate greatly throughout the year.
Due to the wide fluctuations in commodity prices, the revenue for exploration companies can fluctuate significantly from year to year.
Exploration companies typically encounter difficulties in obtaining capital during peak demand times for natural resources. They are not only constrained in terms of revenue but also have significant expenditures. At these times the industry is more likely to be a target for venture capitalthat can keep exploration companies operating until prices for commodities increase.
Because of the nature of the industry, the majority of exploration companies aren’t publically traded.
Mineral Exploration is closely linked to other resource-based industries like oil & gas production mining coal, mining of metals. Most of the companies engaged in exploration of mineral resources also run production operations in other resource segments.
Diversification can help companies decrease their exposure to fluctuating price of commodities since they aren’t reliant on one kind of resource. However, the distinction between different minerals is typically dependent on the speculative grade or inferred resources which means that there hasn’t been any drilling done yet.
The majority of companies must conduct additional exploration in order to convert speculative grade or inferred resources into measured and indicated resources or reserves or reserves. Both are required for mining activities. These kinds of tasks are typically done by junior exploration firms which specialize in early stage mineral exploration.
Mining of mineral resources requires massive upfront capital investment which are extremely risky for exploration companies because there is no guarantee that they will discover valuable minerals. The company could spend substantial amounts for pre-production costs once the ore body has been discovered. They include designing the mine and purchasing long-term supplies.
The expenses of early development have to be weighed against future revenues because it could take a long time before the mineral resource can be made into an operating mine. This cycle of investment has led to many companies carry out some or all of their exploration work through joint ventures with other companies who have the resources to take expensive projects through to production. The advantage of junior exploration companies is that they can focus on early-stage mineral exploration as they partner with larger players that are in a position to finance later-stage development activities.
Many factors determine the success of mineral exploration firms that determine their success, such as their ability raise equity and secure financing from major financial institutions or mining companies. This capital source is essential for junior exploration businesses because it could provide the money needed to take a project through the initial stages of development and exploration.
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If an economically viable ore body is found and production costs are able to be fully covered, there’s likely to be an initial public offering or sale to raise more capital for the construction of mining. If the shares of the company aren’t listed on any exchanges, they could file for bankruptcy or be taken over by a company who is more interested in exploration for mineral deposits.
High-grade copper deposits are some of the most sought-after commodities in mining, as they are able to yield high returns from tiny amounts of ore. Copper is usually extracted from large, low-grade deposits that contain only 0.3 to 0.7 percent copper metal in weight.
Mining companies are classified as junior exploration companies or larger mining companies. They differ in that the latter focuses on large, capital-intensive projects which have resources with proven constant reserves (e.g. Bauxite production and alumina production), while those of the latter are focused on exploration and high-risk resources (e.g. diamonds and gold).