Exploration companies have the aim of finding new mineral deposits. Individual investors and venture capitalists typically finance these companies, which are usually privately owned. These companies employ surveyors, engineers and cartographers to find mining locations. Exploration companies are able to grow quickly when they find a large mineral deposit. They also have access to capital that will allow them to expand their operations.
The majority of mineral exploration firms are small or medium-sized businesses, with under $10 million in annual revenues. Most of them are privately held and lack shares traded on exchanges and therefore, information on their activities isn’t as easily available as other companies. There are some publicly traded exploration firms.
Since production begins only when new projects are found and put into operation The mining industry is a niche sector within the economy. So, in contrast to traditional service or manufacturing industries that produce their products on an ongoing basis mineral firms produce their products in short bursts.
Due to the cyclical nature of the industry, exploration company revenues are highly dependent on fluctuations in commodity prices. The prices of commodities can be highly volatile and fluctuate widely all through the year as they are influenced by factors like Chinese economic expansion, weather conditions that affect crop yields, or demand for petroleum-based goods for transportation.
Exploration companies’ revenues can vary greatly between years due to fluctuation in the prices of commodities.
Exploration companies generally have a hard time raising capital during times of high demand for natural resources. They’re not only not able to generate enough revenue, but also have significant expenses. When this happens, the sector is more likely to be a target for venture capitalists, which could keep exploration companies in business until the prices of commodities rise.
Due to the nature of the industry, most exploration companies are not publically traded.
Mineral Exploration is closely linked with other resource-based sectors like production of oil and gas mining coal, mining for metals. Most companies involved with mineral exploration also make products in other segments of the resource.
The diversification of companies will allow them to be less exposed to the fluctuation of commodity prices as they aren’t reliant on only one type of resource. The differentiation of minerals is often made by using speculative-grade and inferred resource, which means there has not been any drilling.
Businesses often require further exploration in order to convert inferred or speculative grades into indicated or measured resources, or reserves. Both of these are vital to any mining venture. These types of activities are often carried out by junior exploration companies that specialize in early-stage minerals exploration.
The extraction of mineral resources will require massive capital investment that can be extremely dangerous for exploration firms since they’re not sure if they’ll locate valuable minerals. A company can expend significant amounts for pre-production costs once an ore body is identified. This includes designing the mine and purchasing the long-term supply.
The initial costs need to be weighed against the future revenue potential since it could take a long time before the mineral resource can be developed into an operating mine. Many companies have partnered with larger corporations who are able to finance projects with high costs to bring them to production in this joint partnership. The benefit for junior exploration firms is that they can focus on early-stage mineral exploration while partnering with larger players capable of financing later-stage developing activities.
There are many factors that determine the success of mineral exploration companies which include their ability to find equity investors and secure financing from large financial institutions or mining companies. Since it will be able to fund the project’s initial phases of exploration and development, junior exploration companies need this source of capital.
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If an economically viable ore body is discovered, and the production costs can be completely covered, it may be possible to issue shares or go public in order to raise funds for the expansion or construction of the mine. If the company’s shares do not trade on stock exchanges, it could declare bankruptcy or be acquired by a company who is more interested in exploration for mineral deposits.
Copper deposits with high-grade are one of the most sought-after commodities in mining due to their ability to yield high returns from small amounts of ore. Copper is usually extracted from low-grade, large deposits with only 0.3 to 0.7 percent copper metal weight.
Mining companies can be classified as junior exploration firms or large mining companies. They differ in that the latter concentrates on large, capital-intensive projects which have resources with proven reliable reserves (e.g. production of bauxite and alumina production) in contrast, those of the latter focus on exploration activities as well as high-risk resources (e.g. diamonds and gold).