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Mining Exploration Insights Improved Drilling Activity Offset By Drop In Financings

Increases in drilling activity and positive project milestones were no match for decreases in significant financings and initial resources, as S&P Global Market Intelligence's Pipeline Activity Index, or PAI, dropped to 82 from 84 in August. Driven by a decrease in significant base/other metals financings and a dearth of new resource announcements, the base/other metals PAI dropped to 48 from 55, while the gold PAI rose to 125 from 121 over the same period on the back of a rise in drilling activity and an increase in project milestones.

The following analysis is an extract of S&P Global Market Intelligence monthly Industry Monitor, which reviews exploration activity and development in the mining industry. The full report and data files are made available to our Metals & Mining subscribers only. Here are the highlights from our October issue:

Increases in drilling activity and positive project milestones were no match for decreases in significant financings and initial resources, as S&P Global Market Intelligence's Pipeline Activity Index, or PAI, dropped to 82 from 84 in August. Driven by a decrease in significant base/other metals financings and a dearth of new resource announcements, the base/other metals PAI dropped to 48 from 55, while the gold PAI rose to 125 from 121 over the same period on the back of a rise in drilling activity and an increase in project milestones.

Most drilling activity metrics improved in September after a small dip in August. The number of projects reporting increased by six month over month to 199, emphasizing a general support level of about 200 projects monthly in 2019 to date. The number of companies reporting results also rose, to 187 from 180. The total number of significant drill results in the gold and base/other metal categories, which contribute to our Pipeline Activity Index, increased by an even greater margin — by 20 over August.

Despite the fall in the PAI, metals prices were up for the fourth consecutive month in September, as S&P Global Market Intelligence's Exploration Price Index, or EPI, increased to 132 from 131. The indexed price rose for all eight constituents of the index: gold, silver, platinum, copper, nickel, zinc, cobalt and molybdenum.

After the more than US$1 billion raised in 182 financings by junior and intermediate companies in August, the amount raised in September dropped to just US$466 million in 195 completed financings. While the quantity of offerings increased to its highest level in four months, the total value represented the smallest amount raised since the January-February low. The subdued financing activity at the beginning of 2019 has kept 2019 financings to date from matching the level of financings in 2018. Financings for junior and intermediate companies totaled US$6.18 billion in the first three quarters of 2019, representing a 22% shortfall year over year and also a four-year low.

The number of initial resource announcements fell to three from five in August. All three new resources were from gold projects.

Positive project milestone activity was up in September, with the number of milestones increasing to seven from three. All seven milestones were for gold projects, and there were no negative milestones.

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