An exploration company is a firm whose goal is to discover new sources of mineral deposits. They are typically privately owned and operated through venture capitalists and individual investors. These companies employ surveyors, engineers and cartographers to identify mining sites. Exploration companies will grow rapidly when they locate a significant mineral resource. They will also have access to capital in order to grow their business.
Mineral exploration firms tend to be small- or medium-sized enterprises with annual revenue below $10 million. They are mostly privately owned and don’t trade stock on exchanges. Information on them is therefore more difficult to access as compared to other kinds of corporations. There are, however, a few publicly traded exploration companies.
Since production begins only after new projects are discovered and launched Mineral exploration is a niche sector within the economy. Mineral companies can produce their products in short intervals, which differs from the traditional manufacturing and service 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 cycles. Prices for commodities are extremely volatile and fluctuate widely throughout the year because they are influenced by factors such as Chinese economic growth, weather conditions which alter crop yields, and the need for petroleum products to transport.
Exploration companies’ revenues can fluctuate significantly over the course of a year because of fluctuations in commodity prices.
During periods of large demands for natural resources, exploration firms typically lack capital due to large expenditures but only seasonal revenue. At these times the industry is more likely to attract 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 publicly traded.
Mineral Exploration is closely linked to other industries that are based on resources, such as production of oil and gas mining coal, metals mining. A majority of companies that are active in mineral exploration also conduct production operations in different sector of resource.
Diversification of companies will allow them to be less exposed to fluctuations in commodity prices since they do not depend on a single type of resource. However, the differentiation between minerals is usually based on speculative-grade or inferred resources which means there has been no drilling to date.
Many companies require additional exploration to convert inferred or grade speculative into indicated or measured resources, also known as reserves. Both of these are necessary for any mining activity. This kind of work is generally carried out by junior exploration firms who specialize in mineral exploration for the early stage of exploration.
The extraction of mineral resources will require massive capital investment which can be very risky for exploration companies since they’re not sure if they’ll discover valuable minerals. After an ore body is discovered, a company can spend considerable sums on pre-production expenditures including the design of the mine and procuring the necessary supplies to produce for a long time.
It is essential to weigh the costs of developing early against future revenue since it could take several years before the mineral resource is transformed into a functioning mine. Many companies have partnered with larger corporations that can finance high-cost projects in order to bring them to production as part of this joint venture. Companies that are junior in exploration benefit from being capable of focusing on early-stage exploration and partnering with larger companies that can finance later-stage development efforts.
Many factors determine the success of mineral exploration firms, including their ability to obtain equity or get financing from big financial institutions or mining companies. Since it will be able to fund the project’s initial phases of exploration, as well as development junior exploration companies require this source of capital.
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If an economic ore-rich body is found and pre-production costs are fully covered, it may be possible to issue stock or go public to raise capital for the expansion or construction of a mine. If there is no trading of shares of the company on any stock exchange, it could decide to file bankruptcy or be purchased by a different mineral exploration company with better opportunities.
High-grade copper deposits are one of the most sought after commodities in mining since they can make huge profits 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 weight.
Mining companies are classified as junior exploration firms or large mining companies. They differ in the sense that the latter concentrates on massive, capital-intensive mining projects which have resources with proven steady reserves (e.g. Bauxite production and alumina production) and the latter are focused on exploration activities and highly-risky resources (e.g. gold and diamonds).