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Global exploration budgets increase for first time in five years, led by gold

2017 global nonferrous exploration budget up more than 14% year-over-year

London, UK, Oct. 10 2017 — The nonferrous mining exploration sector has shrugged off its recent protracted downturn, with analysis by S&P Global Market Intelligence showing a rise in exploration budgets of more than 14% year-over-year to US$7.95 billion in 2017 — the first increase in the annual global nonferrous exploration budget since 2012.

Key highlights:

  • 2017 global nonferrous exploration budget records first increase since 2012, up more than 14% YOY
  • Budgets expected to rise again in 2018
  • Gold leads charge, zinc makes notable recovery
  • LatAm remains top attraction
  • Industry remains risk averse, focusing on near-mine opportunities.

According to the 28th edition of the Corporate Exploration Strategies (CES) by S&P Global Market Intelligence, this reversal of the near five-year downturn is being led by a robust gold sector, whose activity began picking up in mid-2016. Gold budgets for 2017 exploration are up 22% year over year. Zinc-focused producers and junior explorers have also boosted the zinc budget by 29% year-over-year to US$489 million, based on improved zinc prices since early 2016, according to the CES report.

S&P Global Market Intelligence’s 2017 exploration data and analysis are based on information collected from almost 3,500 mining and exploration companies worldwide, of which more than 1,500 had exploration budgets for 2017. The companies (each budgeting at least US$100,000) budgeted a total of US$7.95 billion for nonferrous exploration in 2017. Including an estimate for budgets that could not be obtained, the 2017 worldwide exploration budget totals US$8.5 billion.*

Since mid-2016, the mining sector has gradually improved in attractiveness as an investment option. An uptick in financing levels for miners over the past 18 months — especially among the junior explorers — has been driven by improved market conditions and stronger metals prices.

Associate Director of Research, Metals & Mining at S&P Global Market Intelligence, Mark Ferguson says: “We know that the juniors have endured the worst of the downturn since 2012, accounting for most of the 40% drop in the number of active explorers over the past five years. However, the new CES budget data indicate that, among all company types, the surviving juniors are making a strong comeback in 2017; they have increased their aggregate exploration budget by 23% year over year, including a 41% increase in gold-only allocations.”

The CES report highlights that major producing companies have also increased their budgets in 2017, allocating 17% more for exploration than a year ago. As a group, the majors still dominate the exploration sector's efforts with almost 54% of the global budget, despite a faster rate of growth among the pure junior explorers.

Ferguson adds: “We expect both of these groups, which collectively account for more than 80% of global exploration budgets, to continue increasing their exploration efforts well into 2018. Sustained market interest will likely benefit juniors the most, allowing their aggregate budget to grow at a faster pace than the producers' budget. As the industry rebound gains traction, we expect a similar pace of increases in 2018 budgets.”

LatAm continues to capitalise on geological wealth

Regionally, Latin America remains the biggest draw for exploration efforts, with the region's aggregate budget increasing 20% year-over-year to almost US$2.4 billion in 2017.

Elsewhere, a diverse region encompassing Europe and most of mainland Asia remains the second most attractive, drawing in 9% more allocations than in 2016, followed by Canada, Africa, Australia, the United States and Pacific/Southeast Asia.**

Perennial mining centres Canada, Australia and the United States have remained the top countries in 2017, with Canada recording a 12% year over year increase in budgets and the remaining two countries each with 19% increases. Latin American countries dominate with half of the top 10 most popular destinations, led by Chile, Peru and Mexico, with Argentina tipping Democratic Republic of the Congo to sit at 10th place.

Investors remain risk-shy

As the CES series has documented over the past few years, exploration efforts have been increasingly focused at or near operating mines, which entail the lowest risk among targets.

The data from the latest report show that the minesite share (37%) of the global budget has risen above both the late-stage share (36%) and the grassroots share (27%) for the first time since the CES series began in 1989, the swing away from grassroots made worse since 2012 by the collapse in market investment in junior explorers and sharp spending cuts by the major producers.

Ferguson says: “Although improved market sentiment over the past 18 months seems to have slowed the decline in grassroots' share of budgets in 2017, another year of increase in the minesite share reflects a near-term focus by many producers, as well as a persisting climate of risk aversion.”




* Nonferrous exploration refers to spending in the search for precious and base metals, diamonds, uranium and some industrial minerals; it specifically excludes exploration for iron ore, aluminum, coal, and oil and gas.

** Given their size and importance to the industry, Canada, Australia and the United States are treated as regions for continental-scale comparisons.

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