Exploration

 
The search for new mineralized deposits in the ground, by use of geophysical and geochemical methods.

Once an exploration company has located a deposit, the next stage is to establish the size of the deposit and whether it is economic to mine.  Exploration companies do not tend to produce profits, as their job is mainly to find deposits, which is a very expensive operation, often in difficult terrain that have no road networks or with poor accessibility and access is only possible via helicopter.  They usually finance their operations through loans, issuing shares, or by joint venture with a larger mining company.

However, when an exploration company succeeds in finding an economic deposit, they can find themselves at the centre of great interest, which often reflects in their share price.

Exploration companies usually fall into two categories:-

1) Grassroots exploration, which is often performed by individuals or geologists who set up a small company (usually a penny share), which operates on limited funds.

2) Junior mining companies, who are already established in mining, but who are eagerly trying to build on their reserves.  Most junior mining companies started life at the grassroots level, but managed to create a working mine.

Larger mining companies carry out exploration as a matter of course, but are usually only interested in large deposits.  All exploration companies are in pursuit of obtaining highly prospective land in which to explore and it is not uncommon to find a number of companies grouped together in a highly prospective region.

It can take up to 8-10 years from the point of exploration to the formation of a working/producing mine, costing millions of dollars.

Exploration work is usually only carried out when higher metal prices make it economical, however due to low prices over the past 15-20 years, exploration projects have been cut back, resulting in reduced short-term production.

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