Global metals exploration is anticipated to rise by 20% in 2018, writes Mark Ferguson.
The global nonferrous exploration budget in 2017 (%).
Global drilling activity in 2017. Credit: S&P Global Market Intelligence
Global spending on the search for nonferrous metals rose to an estimated USD8.4-billion in 2017, compared with USD7.3-billion in 2016, representing the first annual increase in exploration spending after four consecutive years of declining investment in this area. This is according to the World Exploration Trends (WET) report from S&P Global Market Intelligence, released in conjunction with this year’s Prospectors & Developers Association of Canada (PDAC) International Convention.
Improved equity market support for explorers allowed many companies to launch or resume drill programmes on their most promising projects. Although the primary focus was on gold, exploration targeting base metals assets also rebounded in the second half of the year, and the battery metals attracted 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. As a result, the year-end measure of exploration sector activity reached levels not seen since early 2013.
Despite significant market volatility, the generally positive trend in metals prices has continued in early 2018. It is therefore expected that the global exploration budget for 2018 will increase by a further 15–20% year-over-year.
After four years of depressed exploration spending, the mining industry upped the aggregate nonferrous exploration budget to USD7.95-billion by surveyed companies — a 14% increase over 2016. Reflecting funding challenges faced by some junior companies early in the year, the number of explorers with spending plans declined slightly, by 3% year-over-year to 1 535 companies.
Major miners (revenues >USD1-billion) continue to allocate only a small proportion of their revenues to exploration efforts. Riskier exploration remains relatively unattractive. Canada, Australia, and the US continue to lead exploration spending with allocations totalling about USD5.55-billion. The top 10 countries accounted for 70% of the USD7.95-billion global surveyed total. Gold led the way to a higher global budget in 2017.
Lithium exploration allocations in 2017 more than doubled year-over-year, while cobalt-focused exploration also increased strongly. S&P Global Market Intelligence’s measure of exploration activity, the Pipeline Activity Index, jumped to 87 in quarter four from 77 in quarter three, the highest since quarter one 2013, when the recent downturn was just beginning.
|Mark Ferguson is associate research director at S&P Global Market Intelligence.|