GLOBAL mineral exploration activity has again declined dramatically during 2013 with little joy on the horizon for 2014. The decline suggests that by the end of the decade there will be pressure on mineral resource prices to increase owing to supply deficits because without exploration, the new deposits required to meet growing demand will not be ready.
The statistics presented by research groups make depressing reading, echoed by the editor of IntierraRMG’s annual State of the Market report, Dr Chris Hynde, who in describing the research group’s latest report said it showed that drilling activity monitored by the group approximately halved from quarter 3 of 2012 to quarter 3 of 2013 – and activity in quarter 3 of 2012 was itself hugely down on 2011.
It is extremely difficult to imagine the situation improving in 2014 given that the junior exploration sector, which generally does most of the exploration, is in cash preservation mode with drilling almost at a standstill, while the major and mid-tier miners are also cutting back exploration in their drive to trim overall operating costs.
SNL Metals Economics Group’s (SNL MEG) Corporate Exploration Strategies (CES) study shows global nonferrous exploration allocations fell 29% in 2013, dropping to $15.2 billion from $21.5 billion in 2012. It found that exploration allocations for Canada continued to decline in 2013, while increased emphasis focused on Russia and the Democratic Republic of the Congo (DRC).
Allocations to the top 10 countries accounted for almost two-thirds of the exploration budget total in 2013. The top nine countries are the same as in 2012, though there were a few shifts among ranks - Russia moved to 6 from 8, dropping Peru and China back to 7 and 8, respectively. The only other change was that the DRC replaced Argentina in the 10 spot, placing the African country among the top 10 exploration destinations for the first time.
Canada has been the top destination for exploration spending since overtaking Australia in 2002. In 2013, it experienced by far the largest dollar decline in allocations - more than double the declines recorded by the US and Australia - lowering its share of total budgets to just over 13%, its smallest share since 1999. At the same time, Australian allocations decreased 25% year over year (less than the 30% worldwide decrease), leaving it only about $25 million behind Canada.
The United States’ share of worldwide exploration has been about 7% or 8% since 2000, when it stood at 10%. Mexico’s 6% of the global total put it in 4, a place it has held since 2010. Chile took the 5 spot for the third consecutive year, with its budget total US$8 million behind Mexico.
Russia, which first entered the top 10 in 2002, reached the 4 spot in 2005 and 2007. Allocations increased US$20 million in 2013, making Russia one of the few countries to experience an exploration budget increase but its mining sector has seen a significant reduction in foreign investment in recent years. Peru, another regular member of the top 10, dropped to 7, led lower by curtailed gold allocations. China, which first joined the top 10 in 2006, dropped to 8, while Brazil maintained the 9 spot for the fifth consecutive year.