Exploration companies are those that have the aim of finding the mineral reserves of the future. They are usually privately owned and are funded by venture capitalists or private investors. They employ surveyors, engineers and cartographers to find mining locations. Exploration companies can grow rapidly when they discover a huge mineral deposit. They also will have access to capital to further grow their business.
Mineral exploration firms tend to be small- or medium-sized businesses with annual revenues under $10 million. These companies are largely privately owned and don’t trade stock on exchanges. They are therefore less accessible as compared to other kinds of corporations. There are, however, a few publically traded exploration firms.
The mining industry is a unique niche in the market because it is able to begin production once new projects are identified and then put into operation. Mineral companies can manufacture their products in short periods, unlike traditional service and manufacturing industries, which manufacture their products on a continuous basis.
Exploration company profits are highly vulnerable to fluctuations in commodity prices because of the nature of the industry’s cyclical. Commodity prices can be very volatile and fluctuate widely all through the year as they are influenced by factors such as Chinese economic expansion, weather conditions that impact crop yields, or demand for petroleum products for transportation.
Due to the wide fluctuations in the prices of commodities, revenues for exploration companies can fluctuate significantly from year to year.
In times of huge demands for natural resources, exploration firms typically have a shortage of capital, as they are able to make large expenditures but only seasonal revenues. Venture capital is more likely in these periods, which can help to keep exploration companies afloat while commodity prices rise.
Most exploration companies are not listed on the stock exchange due to their nature as an industry.
Mineral Exploration is closely linked with other resource-based sectors like oil & gas production mining coal, mining for metals. Most of the companies that are active in mineral exploration also carry out production in other sector of resource.
Diversification of businesses helps them be less vulnerable to fluctuations in commodity prices since they do not depend on only one type of resource. However, the differentiation between minerals is usually based on speculative-grade or inferred resources which means that there isn’t any drilling done yet.
The majority of companies must conduct additional exploration work to convert speculative grade or inferred resources to indicated and measured resources or reserves, both of which are vital for mining. These kinds of tasks are mostly conducted by junior exploration firms that specialize in early-stage minerals exploration.
Exploiting mineral resources requires large initial capital investments that could cause a lot of risk for exploration companies. It isn’t always guaranteed that they will discover precious minerals. When an ore body has been identified the company may have to spend considerable sums on pre-production expenditures such as the design of the mine, and buying the necessary supplies to produce for a long time.
It is essential to weigh the costs of early development against future revenues as it could take many years before the mineral resource is made into a working mine. Numerous companies have formed partnerships with larger companies who can finance expensive projects and bring them to production as part of this joint venture. The benefit for junior exploration firms is that they can concentrate on early stage mineral exploration and work with larger players that are adept at financing later-stage development activities.
The success of mineral exploration companies usually depends on their ability to raise fresh capital or secure project financing from large mining companies and/or financial institutions. Because it can fund the initial stages of exploration and development junior exploration companies require this source of capital.
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If an economic ore-rich body is found and production costs can be completely paid for, it is likely to be possible to issue shares or go public to raise capital for construction or expansion of a mine. If the company’s shares aren’t listed on any stock exchanges, they may declare bankruptcy or be purchased by a business which is more interested in mining exploration.
Copper deposits with high-grade are one of the most sought-after materials in mining due to their ability to yield high returns from tiny quantities of ore. Copper is often mined from low-grade, large deposits that comprise only 0.3 to 0.7 percent copper metal in weight.
There are two kinds of mining firms: the large and junior exploration firms. The major difference is that the latter deals the largest, capital-intensive projects as well as resources with proven and stable reserves (e.g., bauxite and Alumina production), while the former is focused on exploration in the early phases of projects, high risk projects and resources (e.g., gold and diamonds).