Two Financial Ratios for Mining Exploration Companies

Bell, Peter (2024): Two Financial Ratios for Mining Exploration Companies.

Abstract

This paper presents methods for financial analysis of mining exploration companies. In particular, two financial ratios to compare between companies and over time. The ratios focus on the amount of exploration spending relative to corporate overhead spending and market capitalization. The purpose of comparing exploration spending and overhead spending is to measure relative priority for management subject to financing and other constraints. These two ratios do not measure the quality of the exploration or quality of overhead spending, but they do provide a way to measure the aggressiveness of the management strategy. The paper calculates the two financial ratios for two companies over three years and provides examples of how these two companies use financial ratios in their own financial reporting in ways that are similar to the two new financial ratios. The author is CEO of one of the companies and the timeline under consideration shows a natural experiment before and after the start of the new business strategy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Engineering Economics, Mining, Royalties, Finance
• Subjects: C - Mathematical and Quantitative Methods > C0 - General; G - Financial Economics > G0 - General; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction

References

Bell, Peter N. (2015). "Mineral exploration as a game of chance," MPRA Paper 62159, University Library of Munich, Germany. Retrieved from https://ideas.repec.org/p/pra/mprapa/62159.html Bell, Peter, 2018a. "Updating Probabilities for a Mineral Exploration Project," MPRA Paper 87683, University Library of Munich, Germany. Retrieved from https://ideas.repec.org/p/pra/mprapa/84457.html Bell, Peter, 2018b. "Valuation Simulation for a Net Smelter Return Royalty on a Mining Project," MPRA Paper 87683, University Library of Munich, Germany. Retrieved from https://ideas.repec.org/p/pra/mprapa/87683.html Graham, Benjamin, 1949. The Intelligent Investor. Harper & Brothers. Kermode Resources Ltd. (2024). "2023 ANNUAL MD&A," SEDAR+. Retrieved from https://www.sedarplus.ca/csa-party/records/document.html?id=626163ef56e3e7cd70bb1efda4633e6ae01917f79b413e8cdf0f42111b8c74a8 MinEx Consulting Pty Ltd. (2019). "Long term trends in gold exploration Richard Schodde (presenter)". Retrieved from https://minexconsulting.com/wp-content/uploads/2019/12/Gold-exploration-trends-NewGenGold-2019-TEXT.pdf Nexgen Energy Ltd. (2023). "Consolidated Financial Statements December 31, 2022 and 2021". Retrieved from https://s28.q4cdn.com/891672792/files/doc_financials/2023/ar/NexGen-Energy-FS-Q4-2023-FOR-FILING.pdf Nexgen Energy Ltd. (2024a). "MANAGEMENT INFORMATION CIRCULAR: NOTICE OF 2024 ANNUAL GENERAL MEETING OF SHAREHOLDERS; May 1, 2024". Retrieved from https://s28.q4cdn.com/891672792/files/doc_downloads/AGM/2024/2024-NXE-MIC_1-May-2024_FINAL.pdf Nexgen Energy Ltd. (2024b). "Consolidated Financial Statements December 31, 2023 and 2022". Retrieved from https://s28.q4cdn.com/891672792/files/doc_financials/2023/ar/NexGen-Energy-FS-Q4-2023-FOR-FILING.pdf TMX Group Limited. (2024a). "NexGen Energy Ltd. Trade History Last updated: Jun 30, 2024". Retrieved from https://money.tmx.com/quote/NXE/trade-history?selectedTab=price-history TMX Group Limited. (2024b). "NexGen Energy Ltd. Trade History Last updated: Jun 30, 2024". Retrieved from https://money.tmx.com/quote/KLM/trade-history?selectedTab=price-history