A recently released report from World Exploration Trends 2018 (WET), developed in association with S&P Global Market Intelligence, indicates that global spend on nonferrous metals exploration is expected to rise by 20% in 2018.
|Image source: S&P Global|
Global spending on the search for nonferrous metals rose to an estimated US$8.4 billion in 2017, compared with US$7.3 billion in 2016, representing the first annual increase in exploration spending by mining companies after four consecutive years of declining investment.
Although the main focus was on gold, exploration targeting base metals assets also rebounded in the second half of the year, with battery metals attracting particular attention. In the last quarter of 2017, there was a sharp increase in reported drill results, and financings closed the year on a high note.
Nonetheless, research has shown that industry exploration efforts appeared to be increasingly focused at or near operating mines. A long-term swing away from grassroots exploration has been exacerbated since 2013 by a combination of scarce funding for junior explorers and spending cuts by the majors. Although improved market sentiment over the past 18 months seems to have slowed the decline in grassroots exploration's share of budgets in 2017, another year of increase in the minesite share reflects the near-term focus of many producers, as well as a persisting climate of risk aversion.
The proportion of revenues allocated for grassroots efforts reinforced the perception of an industry-wide shift away from early-stage exploration - the major miners allocating only 0.5% of their 2016 revenues, which was just one-quarter of the 2% of cash flow allocated in 1997. This is not to say that the top earners have completely abandoned generative exploration, but that most large producers have been increasingly focused on late-stage and minesite exploration, while others have supplemented their early- and late-stage exploration by acquiring interests in junior companies, which offer low-risk access to promising new projects.
Canada, Australia and the US continue to remain the top three destinations for exploration spending, with allocations totalling US$5.55 billion. The top 10 countries accounted for 70% of the US$7.95 billion global surveyed total.