Global exploration budgets for nonferrous metals (everything not iron ore) declined 3 per cent to $US9.8bn ($13.6bn) in 2019 from $US10.1bn the previous year, overturning a two-year rebound in the exploration sector.

Data gatherer S&P Global Market Intelligence says the lower budget in 2019 was due to the challenging prices for many commodities throughout the year along with merger and acquisition activity in the gold sector that impacted on exploration priorities.

Conversely, S&P found that budgets for work at or near mine sites increased 7 per cent year over year to $US3.57 billion, accounting for the largest share of the global budget by development stage for the first time.

“In 2019 we witnessed persistent trade tensions between the US and China causing a marked slowing of the major economies, which triggered weaker prices for many industrial metals,” S&P Global Market Intelligence Metals & Mining Research director Mark Ferguson said.

He noted that while gold emerged as a safe haven and nickel and iron saw a sharp rise in prices, the uncertainty about near-term demand for commodities remained a hindrance to the industry.

“The exception to this is gold, which has benefited from the current geopolitical situation,” Ferguson explained.

“With this in mind, we expect the global exploration budget to be flat in 2020, with gains for gold likely to be offset by weaker conditions for most other commodities.”

S&P added that while major mining companies had mostly maintained their allocations, junior and intermediate companies had been less able to raise exploration funds.

The persistent lack of investment in the supply pipeline is also causing several base metals commodities to head toward market deficits, with S&P finding that the focus on later stages of exploration resulted in the discovery rate of new deposits falling to historic lows.

“Unless exploration companies shift their focus back toward grassroots efforts, the dearth of large discoveries in recent years will continue, leaving the industry challenged to meet even modest global demand forecasts, especially for copper,” Ferguson said.


Australia not following the flock

However, Australia appears to have bucked the trend with the Australian Bureau of Statistics reporting that mineral exploration rose in every quarter of 2019.

Mineral exploration expenditure rose 4.9 per cent to $760.6m in the December quarter though the global trend of focusing on the later stages of exploration held true in Australia as well.

Brownfield exploration (exploration around existing mines or advanced projects to expand resources) saw an 8.1 per cent gain to $456.7m while greenfield exploration (underexplored ground that could lead to new discoveries) lagged well behind with a small 0.5 per cent rise to $303.8m.

Total expenditure rose in all states save Western Australia and Tasmania, which saw expenditure fall 0.6 per cent and 2.94 per cent respectively.

This is despite WA taking home the trophy as the world’s most appealing jurisdiction for mining and exploration investment, according to the 2019 Fraser Institute’s Annual Survey, and moving to slash red tape.

Association of Mining and Exploration Companies chief executive Warren Pearce put this in perspective, noting that while the expenditure in the state slid by $3m in the December 2019 quarter, the September 2019 quarter marked its highest gains in eight years.

South Australia and Victoria notched the biggest gains, with expenditures rising 36.4 per cent and 30.9 per cent respectively.

New South Wales expenditure was up 24 per cent, Queensland rose 5.6 per cent and the Northern Territory gained 1.6 per cent.

“Today’s figures defy the tough investment environment for mineral exploration companies. They show that companies are finding ways to fund further exploration, supporting stronger growth in the industry,” Pearce said on Monday.

“Australia needs continued investment in mineral exploration to find the mines of the future and unlock the jobs and growth still waiting to be discovered.”

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