LARGER mining industry players accounted for 40% of the US$10.74 spent on mineral exploration during 2014. The 25th edition of SNL Metals & Mining’s Corporate Exploration Strategies (CES) study shows that the larger companies budgeted a total of US$4.33 billion in the year for exploration.
The study identified 39 major players who each budgeted at least US$50 million for exploration. The top three explorers in 2014 include copper producer Antofagasta, diversified major Vale and precious metal producer Fresnillo.
Chile-based Antofagasta had the world’s largest nonferrous exploration budget in 2014. Its program was growth-oriented and emphasized late-stage and feasibility work. A strong grassroots effort included programs in the Americas, Europe, Africa and Australia.
In second place, Vale was the largest explorer among the diversified majors, also with an emphasis on late-stage work. Vale continues to challenge Norilsk for the title of world’s top nickel producer and its 2013 output of 260,200 tonnes was just 25,000 tonnes short of the 285,000 tonnes produced by the Russian miner. Vale also considers copper one of its core commodities, although production growth has been more gradual. Significant exploration spending is also directed to fertilizers in Brazil and Peru.
Rounding out the top three is Mexico’s Fresnillo. Formed through a spin-off of Industrias Penoles’s precious metals assets, Fresnillo is the world’s largest primary silver producer and one of Mexico’s largest gold producers. Directed almost entirely to Mexico, Fresnillo’s budget is spread fairly evenly between all stages of exploration, with a slight emphasis on advancing several pipeline projects.
The CES study includes allocations for gold, base metals, platinum group metals, diamonds, uranium, silver, rare earths, potash/phosphate, and many other hard-rock metals. They specifically exclude exploration budgets for iron ore, coal, aluminium, oil and gas, and many industrial minerals.
Together, the 39 larger players contributed 40% of the worldwide exploration total in 2014, with gold representing 41%, copper 32% (base metals 41%), and 7% each for diamonds and other targets (including silver, potash, phosphates and manganese). Two of the larger players, Alrosa and De Beers, account for 69% of worldwide diamond exploration.
The 25 larger players with gold exploration budgets are responsible for 39% of worldwide gold allocations. The group’s copper explorers account for just over half the total copper budget.
Conventional wisdom holds that the major companies leave grassroots exploration to the juniors, so it may, therefore, be surprising that the larger players contributed 40% of all greenfields allocations in 2014. A persistent financing drought has squeezed juniors’ budgeting to the point that the majors have become the biggest drivers of early-stage exploration.
Similarly, the larger players traditionally dominate mine site spending. In 2014, however, they accounted for only 51% of the near-mine work as their investors demanded improved returns over growth. It is also interesting to note that the larger players were responsible for just 32% of late-stage exploration and feasibility work.
Geographically, the larger players have allocated their budgets somewhat differently than the overall group of 1961 companies. The top 10 target countries for the larger players are the same as for the overall group. However, for the larger players Chile replaces Canada as the primary exploration destination, as Chilean budgets account for a much larger share (12%) than the entire industry’s share (6.6%), reflecting the significant presence of major copper miners in the relatively secure Latin American country.
The mature jurisdictions of Canada and Australia have garnered much smaller percentages (10% and 7.5% respectively) of the larger players’ budgets than the shares allocated by the entire industry (14% and 12% respectively), as junior and intermediate companies contribute a considerable portion of the exploration dollars spent in these countries. The US has also dropped in the rankings, although budgets by the larger players account for a greater share (8.4%) of the total than the share allocated by the group of 1961 companies (7.1%).
Russia has moved up in the rankings, from eighth to fourth place, with 79% of its total allocations coming from seven larger players. Conversely, China, where 56 companies with allocations of less than US$20 million are contributing 53% of the total, drops from sixth to 10th place.