What are the pros and cons of self-operate exploration drilling machines and Contract Drilling Companies in the mining industry?

Answer 1

In the mining industry most companies cannot afford the cost of maintaining the drilling equipment nor infrastructure required to do inhouse exploration. Self-operated exploration drilling requires the company to have and H/R staff which can higher high caliber people and then attach them to the corporate employment package for the long term. Most self-operated exploration drilling machines cost 2 times as much as contract drilling companies that can distribute the costs and employment agreements over multiple footage projects and locations. Contract Drilling companies stay abreast of new developments in the industry and maintain records to track costs thus arriving at the most economical footage results available for the formations being drilled. (no hidden cost) Self-operate exploration drilling have costs that are ignored and/or written off in other areas of the corporate structure. ie Repairs, fuel, moves, administration. Pro of Self-operated exploration drilling are that the company attains the information on the ore bodies in a more timely manner to make mining development decisions on and operating mine. Self-operated exploration drilling and contract drilling is similar to large mining company keeping staff to do raw exploration- they don't. The large mining companies invest in the junior exploration companies to find new ore bodies which allows them to have experience people looking for ore bodies and managing them selves vs. maintaining a large costly exploration staff. The juniors use contractors because they cannot afford the large capitalization for the drilling equipment and tooling to do small exploration projects to see if they have and ore body. If the junior finds and ore body the large mining company will fund the drilling project for a percentage of the property or will buy out the juniors stock to own the property. The economics of the property will dictated the pros and cons of in-house drilling or contract drilling. It may come down to the risk involved in the ore body involved.