Exploration companies are those that seek to discover new mineral deposits. Individual investors and venture capitalists often finance these companies which are usually privately owned. They employ engineers, geologists surveyors, cartographers, and others to discover areas for extraction of mining. Exploration companies can expand rapidly when they discover a huge mineral resource. They will also have access to capital to further expand their operations.
Most exploration companies in the field are medium to small-sized companies that have less than $10 million in yearly revenues. Most of them are privately held and lack stocks traded on exchanges so information about these companies is not as readily available as other corporations. There are a few publically traded exploration companies.
Since it only begins production when new projects are found and implemented Mineral exploration is a niche sector within the economy. Therefore, unlike traditional manufacturing or service industries that manufacture their products regularly, mineral companies produce their products in short bursts.
Because of the cyclical nature of this sector, revenues from exploration companies are extremely susceptible to price fluctuations for commodities. Due to factors such as Chinese economic expansion, weather conditions which influence crop yields and the demand for petroleum-based products to transport, commodities prices can be volatile throughout the year.
Due to the wide range of fluctuations in commodity prices, the revenue for exploration companies can vary significantly from year to year.
Exploration companies typically have a hard time raising capital during high demand periods for natural resources. They’re not just limited in their revenues but also have significant expenditures. Venture capital is more prevalent during these periods, which can assist in keeping exploration firms afloat while commodity prices rise.
Most exploration companies aren’t listed on the stock exchange due to their industry nature.
The Mineral Exploration industry is closely connected to other industries that are based on resources such as oil and gas production, coal mining, and mining & metals. Many companies involved in mineral exploration also operate in other areas of resource.
The diversification of companies helps them be less vulnerable to fluctuations in commodity prices since they do not depend upon a specific type of resource. But, the distinction between minerals is often based on speculative-grade or inferred resources, meaning that there hasn’t been any drilling done yet.
Many companies require more exploration to convert their inferred or speculated grades into indicated or measured reserves or resources. Both are crucial for every mining endeavor. These types of work are mostly done by junior exploration firms that specialize in early-stage minerals exploration.
Mining of mineral resources is a major capital expense upfront that can be extremely risky for exploration companies since they cannot be sure to find precious minerals. A company may have to spend large sums on production costs prior to an ore body is discovered. This can include the design of the mine, and buying long-term supplies.
It is essential to weigh the cost of exploration against future revenue because it could take many years before the mineral resource is turned into an operating mine. This cycle of investment has led many companies to conduct some or all of their exploration by forming joint ventures with other firms that have the resources to take high-cost projects through to production. Smaller exploration companies have the advantage of being in a position to concentrate on early stage mineral exploration and partner with larger players that can finance later-stage development activities.
There are many factors that determine the success of mineral exploration firms and their ability to raise equity and obtain financing from large financial institutions or mining companies. This source of capital is critical for junior exploration firms because it is able to provide the funds needed to advance a project through the early stages of exploration and development.
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If an economic ore body is discovered, and the production costs can be completely funded, it will typically be possible to issue stocks or go public in order to raise capital for the development or expansion of a mine. If there is no demand for the shares of the company on any stock exchange, the company could decide to file for bankruptcy, or be acquired by another mineral exploration company that has better prospects.
High-quality copper deposits are one of the most desirable commodities for mining. They are able to make huge profits from the smallest amounts of ore, and they are only 0.3% to 0.7 percent copper in weight.
There are two types of mining companies: major and junior exploration firms. The major difference is that the latter concerns itself with large, capital-intensive projects and resources that have been solid and proven reserves (e.g. the bauxite mine, Alumina production) however the former is focused on early-phase exploration activities, high-risk projects and resources (e.g. gold and diamonds).