World mining exploration spending forecast to sink another 10-15% in 2015
Global mining exploration spending is set to fall 10-15% in 2015 to roughly US$10bn as no meaningful recovery is expected in metals prices, according to Jason Goulden, director at SNL Metals & Mining.
The drop would be the third consecutive annual decline and put global spending at its lowest level since 2009.
Junior mining companies did not raise significant cash in the latter part of 2014 – out of line with the historical trend of exploration firms raising funds late in the year to gear up for the coming year's programs – meaning junior activity will certainly be slower in 2015, Goulden said Monday at the 8th Exploration Forum being held in Santiago as part of Cesco Week and organized by Editec.
Meanwhile, major miners have made deep cuts to mining exploration spending during the past three years of focus on capital discipline, and SNL expects majors' exploration budgets to remain stable in 2015 with no significant increase.
Indeed, overall exploration spending has been steady – if low – over the last year as stable activity by major mining companies has partially made up for a continued decline in junior activity.
Of particular consequence is the continued decline in grassroots exploration spending, which fell as a portion of total exploration spending to 30%, surpassed for the first time by mine site exploration (31%), which has risen steadily over the past 10 years.
Late stage exploration (defined as continued exploration after a project has an initial resource estimate) accounted for 38% of 2014 spending, a slight uptick after declining in 2013.
The trend is resulting in a slower rate of discovery of new deposits, which could put pressure on the mining industry in future years as the pipeline of new projects shrinks, Goulden said.
LATIN AMERICA: COPPER EXPLORATION KING
The trend of major miners driving exploration spending, a factor in the decline in junior-dominated grassroots exploration, is particularly strong in Latin America. While majors accounted for less than 50% of global spending in 2014, in Latin America the figure was 65%, Goulden said.
In Latin America gold and base metals made up more than 80% of total exploration spending and copper made up some 85% of base metal exploration.
The region accounted for more than 38% of global copper exploration spending, far more than any other region, with Chile contributing 20%, Peru 9%, Mexico 4% and Brazil 3%.
All of these figures are a natural consequence of the predominance of the world's biggest majors and their massive copper mines in Chile and, to a lesser extent, Peru and Mexico.
It also means that Latin America is even more prone to the trend of disappearing grassroots work and pipeline risk than the world as a whole, which could impact investment in project development further into the future but will mean continued opportunities for junior exploration once market conditions rebound.
Of total Latin American non-ferrous metals exploration spending in 2014 of roughly US$11.4bn, Chile and Mexico accounted for 25% each, Peru 20%, Brazil 11%, Colombia 6%, Argentina 5% and Ecuador 2%.
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