European Geologist Journal 49

Considerations for financing and encouraging successful exploration within the EU


by Eamonn F. Grennan



This paper outlines the challenges attached to the exploration for a wide range of metals and minerals. It addresses a number of factors amongst the general public in regard to the differences between exploration, mining, refining and product manufacture. The fact that the exploration philosophy employed in one resource industry differs significantly from another resource industry and that the attitude of the players is extremely different is one of the reasons why there has been a dearth of new discoveries in Europe, especially in regard to the ‘emergent metals’ required for the low carbon economy. Most people are unaware of the very high element of risk at the commencement of the exploration phase. Since Europe has only a very small indigenous mining industry, the only way to restart it is by way of direct financial investment channelled through SMEs, which are known in the industry as “junior” minerals exploration companies. In respect of metals this, along with social acceptance, is the key challenge for our basic industries.

Overview of European Commission (EC) policy

Last year in a presentation to the European Investment Bank Maroš Šefčovič, a vice president of the European Commission, made the point that, “Without undertaking its own exploration, the EU will have no mining projects. This, in turn, means no refineries and, without refining capacity, the EU will continue to be in great part dependent on foreign supplies of high-quality materials” (Šefčovič, 2019a).

This is one of the rare occasions when it has been explicitly pointed out that raw material policy formulation must not begin with extraction, as is exemplified by Figure 1a, but has to start with exploration, as in Figure 1b.

Figure 1: Two approaches to raw material policy formation (RMIS, 2019, after Mancini et al. 2018).

Šefčovič (2019b) also stated, “If the European Battery Alliance has taught us one thing it is that top-down approach does not work. We need to understand …. what is needed to accelerate this transition and mitigate its impact”. In other words, ‘business as usual’ is no longer an option. He goes on to make the point that we need to finance exploration.

The ERA-MIN roadmap (2013) recognised this and listed five key areas, “exploration, extraction, mineral processing, metallurgy, and mine closure and rehabilitation”. This is one of the few EC documents that actually highlights the need for exploration and the fact that “exploration in the EU lags far behind that of most developed countries” and further notes that its development “depends on clear enabling public policies”.


When supra- or inter-governmental bodies such as the UN, the EC or the World Bank discuss the supply of metals, exploration is often not even mentioned, as it is usually conflated with “mining”. Thus, the initial phase and the highest risk activity involved in the raw material supply spectrum, the exploration phase, is omitted from consideration. The fact is that exploration and mining are two very distinct albeit related industries. Thus, for proper policy formulation it is essential to understand the difference and how the companies involved in the discovery of raw materials are structured. Unless the composition of the metals discovery and supply industries is understood, the problem of supply will worsen. This is particularly true in any discussion relating to the discovery and securing the supplies of critical raw materials.

There are three types of mining companies, each with different exploration strategies. Furthermore, the corporate structure within the metals exploration industry is very different from that of the oil & gas industry and both contrast with exploration for “industrial minerals” and similar activity within the “Command Economies”. Unlike oil & gas companies and large-scale producers of industrial minerals, metals companies, with exceptions such as aluminium and iron, are often not vertically integrated. It is not a one- size-fits-all scenario. Each structure has its own set of corporate governance requirements, and, most importantly its own different philosophies and targets.

Corporate structure of exploration companies

Major multinational oil & gas companies

These companies are amongst the largest corporations in the world and until the advent of the tech and social media companies, inevitably filled most of the Top 10 slots of the largest stock exchanges in the world. Nearly all of the major oil companies have at some stage during the past 30 years become involved in minerals exploration, notable mainly for their lack of success.  There is clear evidence that whilst a cross-sector transfer of specific exploration technologies is important, such as the increasing application of seismic technologies in mineral exploration, the exploration targeting is distinctly different.

Within the oil & gas industry there are many smaller companies which are usually part of an exploration consortium exploring or who for investment reasons are sharing the profits of a producing field. They are much smaller than the major oil & gas companies, but have a much larger capitalisation than the junior mineral exploration companies. Their governance tends to be more akin to that of the major multi-national oil & gas companies. They may occasionally become involved in minerals exploration, but like the majors their impact on minerals exploration is almost negligible.

“Junior” mineral exploration companies

The junior mineral exploration companies are at the other end of the financial spectrum, as the oft-quoted investment phrase puts it, “investment in them is not for widows and orphans.” Indeed, the risk of failure is so great that there are only a limited number of stock exchanges around the world that trade in the shares of such companies, which operate within special rules. The main Exchanges which trade these shares are in Canada, Australia, South Africa, and the London AIM exchange. The term “SME” (small and medium-sized enterprise) truly describes these companies.

The key aspect is that they are not “mining” companies at all, they are solely involved in minerals exploration, and possibly some early-stage development. These companies rarely have any operating income. The companies tend to have a short life; few last longer than 10–15 years. They are usually set up by someone with an entrepreneurial mindset and a technical or administrative background in another exploration company or an established mining company.

Initially these companies will self-finance, building-up a portfolio of prospects and/or ‘properties’, particularly those that have some known mineralisation within them or close-by, and strive to enhance the prospectivity of their ground holdings as a prelude to floating a company on the stock exchange. In order to survive, a characteristic of these companies is their ability to rapidly change their exploration commodity focus, as metal prices increase or decrease, or indeed their location in response to regulatory hurdles or discoveries elsewhere. On upgrading the prospect, or making a “discovery”, financing to advance the project will then often be sought from a major. During this phase the junior company often retains management of the exploration programme. Inevitably, as the project advances into feasibility studies, management will devolve to the major with the junior retaining a minority share.

Distinction between metal mining and industrial minerals companies

Historically the difference between mining companies and industrial minerals companies was that the former mined metalliferous ores, and typically sold the product to third parties on the global markets whilst the latter mined ‘industrial minerals’ for their own internal, often local requirements.  With the rise of “specialty metals”, such as chromium, titanium and lithium, this distinction is no longer clear cut.

As a result of this basic difference the exploration funds available to mining companies are mobile and will seek out the best opportunities in whatever jurisdiction, whereas industrial mineral companies focus on areas close to their own production plants and/or local markets, confirming the old adage that, ‘Mining companies are into mining because they want to be, whilst Industrial Minerals companies are into mining because they have to be’. This goes a long way in explaining why Europe has a well-developed industrial minerals industry and a metalliferous mineral supply problem.

Mining companies

Every mining company started life as an exploration company, and to a greater or lesser degree, continues to have Exploration Divisions dedicated to the discovery of new deposits. Some have become so large that prior to the ‘Tech Revolution’ they were amongst the largest capitalised companies in the world; the term multinational is appropriate to apply to such entities.

These divisions often have their own corporate structure, principally because the working environment and ethos are very different from those within a mine. The exploration arm varies from one company to the next, but there are three basic scenarios.

(A) In some companies, especially the very large mining corporations, it acts primarily as a ‘listening service’. During the course of a discovery by other (smaller) companies, they will seek to join forces, by offering financial and technical advice. Together they will attempt to expand the size of the deposit and bring it into production.

(B) Over time, the very large mining companies with the small exploration divisions realised that their mergers and acquisitions system was not working and that in particular they were having to pay ‘over-the-odds’ prices to acquire good prospects and/or deposits. As a result, their business model evolved into a system of financing junior exploration companies to act as their exploration arm, particularly in grass-roots exploration in frontier areas. Whilst the latter were paid for their services, they were also given the promise of a share of any mining company that would emanate from the project.

(C) The third system applies mainly to mid-size mining companies.  Their exploration division tends to be more active in grass-roots exploration, where it can also move faster if a junior company makes a discovery. The exploration division will have its own budget. It is generally accepted that the more independent that it is from the mining operation(s), the more likely it is to be successful. However, the downside to this independence is that in times of financial austerity it will be the first part of the company to have its budget reduced. By and large these exploration divisions tend to be successful.

The actual mining operation, whatever the origin of the discovering company, usually carries out some processing on site.  The concentrate is then transported and sold to a third party, usually a smelting company for further processing and refining. Some mining companies may own and operate smelters, the products and by-products of which are then sold on to a wide variety of end users. There will rarely be a corporate linkage between the junior company and the smelting company or between the mining company and the user(s) of the metal(s). There are exceptions, such as single metal (e.g. aluminium and iron) companies, which tend to be very large vertically integrated corporations, with exploration arms, mining operations, smelters/refineries and a sales office.  In this way they resemble the oil & gas companies.

Industrial minerals companies

Industrial minerals companies vary enormously depending on the ultimate product. Diamond producing companies often have exploration divisions, mainly as a “listening system”, comparable to Type (A) mining companies described above. Gypsum companies tend to be more actively engaged in exploration, particularly in areas close to a gypboard or plaster producing plant, and are therefore somewhere between Types (A) and (C). On the other hand, companies producing talc-based products, for example, are unlikely to have an exploration arm or a mining division and tend to buy the raw product from a long-term supplier.

The specialty metals companies, which are often only interested in small quantities of that metal, are most likely to purchase the metal as a by-product from a large metal smelting operation. Then there are metals such as chromium which may be discovered by ‘accident’ or design by a metals exploration company which may then join forces with a mainstream production (and sales) company, and proceed to extract the chromite ore, with the probability that it has reached an off-take agreement with a user for its product. In 2010, the EC emphasised that the supplier base for such products (that is, industrial minerals) is in many cases highly concentrated (EC, 2010).

Many of the industrial minerals companies are usually vertically integrated in a manner that would be unusual in the metals mining industry. If they are mining the raw material, their operations tend to have a life of >50 years, hence exploration is not a big consideration.  They are typically legalistic, monopolistic, stock-market conscious and blue-chip companies.

With the increasing use of specialty minerals, such as rare earths, cobalt and lithium and their presence within the Critical Raw Materials framework of the EU, the structure of the companies involved in the exploration for, the development of mining projects and the processing of these materials is quite diverse. It spans the spectrum of junior exploration companies, metal mining companies and industrial mineral processing companies. These distinctions have become central to the continuing development of European industry and will be further examined below.

Resource exploration and extraction in command economies

The author notes that it was very difficult to obtain information on the exploration philosophy of entities within the Command Economies. Effectively the only data available is from “economics-centred” papers. However, based on personal experience in Kazakhstan, additional comments from Duncan Large and from colleagues who have carried out work in the former CIS during the past 20 years, the following is a brief commentary.

Basically, in the twin industries of exploration and mining, a central authority issues a command to identify particular raw materials to meet the demand requirement of the economy. Large, centrally controlled exploration teams are mobilised with a single focus to conduct multi-annual programmes. These teams made discoveries, which were then brought into production, often irrespective of their economics, the only criteria being that the essential needs of the overall economy be met.

With the collapse of the communist regimes in the 1980s, a transition to “western” style exploration ensued and major “western” mining companies prepared for the “Great Leap” eastwards. Unfortunately, it turned into a weak-kneed limp (Large, pers comm). Amongst the reasons for this failure is that many of the philosophical legacies of the communist era remain deeply embedded in the economic systems. Today in Eastern Europe another Command Economy entity, China, is playing a major role in resource development.


According to ERA-MIN (2013) “The EU currently imports between 60 and 100% of all metals used by its industry, with attendant penalties for the continent’s balance of payments and security of supply”, thus “One of Europe’s challenges is to secure sustainable supply of raw materials, increasingly from European sources.” As noted earlier, minerals exploration is often not even mentioned and it is usually conflated with “mining”.  Since exploration is a fundamental pre-requisite to resource production, this paucity of reference lies at the heart of Europe’s failure to encourage and facilitate a successful minerals exploration industry and its knock-on effect of a sustainable mining industry.  Securing an indigenous and sustainable supply of raw materials can only be achieved if it is recognised that a separate minerals exploration industry is required, and this cannot be done without specifically incentivising exploration.

Minerals exploration and mining are two distinct sectors.  Exploration is a faith-based risk: does the deposit being sought even exist? Mining has huge financial risks. Within centrally controlled economies and most of the non-English speaking countries in the EU, exploration risk is undertaken either by a state agency or a state-controlled mining company. The true cost of exploration and the very high risk attaching to it have been hidden.

At present there is much emphasis on deep deposits to the detriment of looking for medium-near surface (50–300m) deposits. Such deposits should be easier to find and are most likely to be found by cost-efficient minerals exploration SMEs, which will identify not only new deposits but provide excellent clues in the search for deeper deposits. Indeed, “In the past 2-3 years, renewed interest in the minerals sector has led to an expansion of mining, particularly around the fringe of Europe, from Ireland through Scandinavia and eastern and southern Europe to Portugal” (Grennan and Clifford, 2018). One of the long-term goals of the EC is that exploration activity is spread out throughout Europe.

Currently China, a major command economy, is dominating the supply of raw materials, particularly those indispensable to carbon-neutral renewable energy technologies. As Šefčovič (2019a) said: “we cannot sit idle while China is taking control of all the supply”. He continued “So, we need to invest strategically into both primary (exploration, extraction and refining) and secondary raw materials (recycling)”. This will only happen with the recognition that minerals exploration is a very high-risk business. The ad-hoc Group (EC, 2010) recommended that there should be policy actions which would improve the fair treatment of the extraction industries and to develop “a more streamlined permitting system”. The ERA-MIN roadmap (2013) is one of the few EC documents that highlights the need for exploration. It notes that within the EU exploration is lagging far behind most developed countries, and that its facilitation is dependent on “clear enabling public policies”. A further recommendation from ERA-Min (2013) includes the formulation of appropriate actions that “include the development of exploration programmes co-financed by the public and private sector in Europe and the host country”.


The evidence suggests that the best and most efficient way to find a deposit is to allow small exploration companies to flourish, whereby they can raise high risk finance and/or obtain exploration funding from major mining companies.  Both systems have enjoyed success. The exploration and research goals must seek to develop a cradle-to-gate (from geological resources to the marketed minerals and materials) as a public good. SMEs within the minerals exploration sector have a very good track record.

However, thus far many of the grant aid programmes are highly bureaucratic. Small companies cannot afford the time and lack the administrative resources to apply. There needs to be a grant level below which the administrative procedures are relaxed. The EU has been one of the foremost supporters and promoter of SMEs and within the EU, the requirement to have at least two partner countries should be retained. It is hereby recommended that grants of up to €500,000 (with no minimum) per annum, for a minimum of five years, be made available to SMEs who have matching equivalents, and that national tax legislation to encourage exploration investment (similar to other jurisdictions) be adopted. This would have the double effect of being attractive to SMEs and attractive, indirectly, to major mining and industrial companies.

The importance of mining for rural development is self-evident, if only because ‘a mine is where you find it’, it cannot be moved. As the EU does not have a self-sustaining Critical Raw Materials mining industry, the only way to restart it is with SMEs, known in the industry as “Junior Companies”.  Given the EC’s onus on the development of the SME sector, the supply of indigenous raw materials for European industry provides a wonderful chance for the development of a symbiotic relationship between EC funding, junior mineral exploration companies and ensuring security of supply of raw materials.


I wish to acknowledge and thank Emer Blackwell and John Clifford for the many positive suggestions and their editing expertise.


ERA-MIN (2013). The first ERA-MIN joint call on sustainable and responsible supply of primary resources. Accessed in 2013 and March 2nd 2020.

European Commission, (2010). Critical raw materials for the EU. Report of the Ad-hoc Working Group on defining critical raw materials. Brussels.

Grennan, E.F. and Clifford, J.A. (2017). Resource sustainability – Geology is the solution. European Geologist 44, 28­–31.

Mancini, L. Benini, L. and Serenella, S. (2018). Characterisation of raw materials supply based on supply risk indicators for Europe. The International Journal of Life Cycle Assessment, 23, 726–738. DOI: 10.1007/s11367-016-1137-2

RMIS (2019). RMIS Newsletter no. 1 (November 2019). Joint research centre (JRC), Raw Materials Information System. European Union.

Šefčovič, M., (VP European Commission) (2019a), Presentation to the European Investment Bank (June 2019). Accessed August, 2019.

Šefčovič, M., (VP European Commission) (2019b). Towards a green industrial policy for the EU. Presentation in Brussels at the Ambrosetti Club Europe (July 9th) on EU Industrial Policy. Accessed August 2019.

This article has been published in European Geologist Journal 49 – Mineral raw materials in Europe – Chances and challenges for domestic production

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