How is Mineral Exploration Funded?
Funding for mining exploration is derived from two primary sources: equity financing from stock markets (mainly those in North America, Australia, London, and South Africa), and revenue generated from mining operations. In this article, we will focus on stock markets since revenue from mining operations does not usually apply to junior exploration companies.
One of the foremost sources of funding for mineral exploration is equity financing through stock markets. Junior exploration companies rely heavily on raising capital through the stock market, while major mining operators also obtain a fraction of their exploration funding from this source.
Juniors can raise substantial exploration funds during periods of strong stock market and metal prices. Nevertheless, when the markets and/or metal prices are low, financing exploration can become challenging for juniors.
According to S&P Global Market Intelligence (S&P), significant financings - valued at $2 million or more - raised by junior companies fell 45% year over year in 2022 to $11.29 billion. The total including financings below $2 million was $12.18 billion.
Despite the challenges posed by market fluctuations, the reliance on stock markets for mineral exploration funding remains significant. Junior exploration companies continue to seek capital through equity financing, while major mining operators supplement their exploration funding through this avenue. During periods of favorable market conditions and high metal prices, juniors have the potential to secure substantial exploration funds. However, as indicated by S&P Global Market Intelligence's data, the year-over-year decline in significant financings for junior companies in 2022 highlights the impact of market volatility on funding availability. Nonetheless, stock markets continue to be a crucial platform for raising capital, allowing exploration companies to advance their projects and contribute to the discovery and development of valuable mineral resources.