Page 72 - Introduction to Mineral Exploration

4: RECONNAISSANCE EXPLORATION 55

President

Vice-President, Exploration Vice-President, Mining

Central Engineering
Mines Managers

Manager Manager Manager
Manager, Exploration Manager, Geophysics
Geological Staff Mines
Research Functions Geology

Geophysical Geophysical Geochemistry Geology Admin. Chief Special Chief Mine
Region Managers
Services Research Labs. Labs. Services Geologist Projects Geologist

Staff Project
Project Managers
Geologists Geologists

FIG. 4.2 Organization of exploration in a large mining group with producing mines.

4.1.2 Budgets million to $100 million per annum depending
upon the size of the company and the size
Exploration costs are considered in two ways: of the deposit for which they are searching
(i) as an expenditure within an organization and (Table 4.1). For producing companies most
(ii) within the context of a project. It is usually exploration can be written off against tax. The
the exploration manager that considers the smaller company is at a disadvantage in that
former, but it is as a geologist on a specific money must be raised from shareholders. This
exploration project that one becomes involved is easy in times of buoyant share prices. For
in the latter.
example, about $C2 billion were raised in the
late 1980s for gold exploration in Canada,
largely on the Vancouver Stock Exchange. This
Corporate exploration expenditure
was aided by flow-through schemes which
Finance for corporate exploration is derived enabled share purchasers to offset this against
from two main sources, revenue from existing tax liabilities. In a similar way, but without tax
production and by selling shares on the stock breaks, about US$100 million was raised on
market. In the first case the company sets aside the Irish Stock Exchange from 1983 to 1989
a percentage of its before-tax profits for explora- (Gardiner 1989). At the peak of the 1996 boom
tion. The decision as to the percentage set aside $1.1 billion was raised in one year on the
is based upon how much the company wishes Vancouver Stock Exchange. This was through
to keep as capital, for their running costs, as initial public offerings of companies and private
dividend for their shareholders, and for taxes. placements to individuals and investment
Exploration costs may range from 1% to 20% funds (Hefferman 1998). Although major min-
of the annual corporate cash flow but for large ing groups should be able to maintain con-
diversified companies this is an average 2.5% sistent budgets and avoid business cyclicity,
of sales and 6% for gold companies (Crowson there seems little evidence of this. In a study of
2003). This may be anything between US$0.5 major groups Eggert (1988) demonstrated that