Two Financial Ratios for Mining Exploration Companies

Peter Bell

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Engineering Economics; Mining; Royalties; Finance (search for similar items in EconPapers)
JEL-codes: C0 G0 L7 (search for similar items in EconPapers)
Date: 2024-06-30
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