trending Market Intelligence /marketintelligence/en/news-insights/trending/ykk3sumpxfrrryojhaco9w2 content esgSubNav
In This List

Western Australian exploration uptick points to cautious recovery, say analysts

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Blog

Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

Blog

Essential Metals Mining Insights November 2021

Blog

[Infographic]: 2021 World Exploration Trends


Western Australian exploration uptick points to cautious recovery, say analysts

Western Australia continued to receive more applications for exploration licenses as well as permits to conduct exploration activity in the fourth quarter of 2017, a sign that market watchers say points to expectations of a cautious recovery in the state's resources sector.

In the fourth quarter of 2017, the number of applications for new programs of work rose by 45% year over year, and applications for new exploration licenses jumped 92%, according to an analysis by S&P Global Market Intelligence of publicly released data from the Department of Mines, Industry Regulation and Safety of Western Australia. On a quarterly basis, the number of new exploration license applications also increased by 45%, while new programs of work slipped by 8%.

On the other hand, new applications for prospecting licenses were down by 37% year over year, while new mining proposals fell by 12%. The number of new mining license applications was flat compared to the same period a year ago.

Warren Pearce, CEO of the country's Association of Mining and Exploration Companies, or AMEC, notes that the industry appears to be at the beginning of a recovery, with increasing numbers of juniors and foreign investors pumping capital into the field.

"It has been much easier for these [junior] companies who have struggled in the last two to three years [to secure funding]," Pearce said in an interview with S&P Global Market Intelligence.

Providing further evidence that Western Australian exploration is on the rebound, Pearce noted that companies have reported increasing delays in obtaining laboratory analysis, as more materials are being sent for testwork, as well as a significant increase in the number of drilling holes.

Karen Caple, acting executive director of resource and environmental compliance at the department, said in an emailed response to questions that the upturn in application numbers was mainly due to increased interest in gold, iron ore and tin-tantalum-lithium, which recorded year-over-year rises of 51%, 74% and 100%, respectively, in program of work applications in the quarter.

Caple added that Western Australia has been seeing continuous increases in exploration activity over the past few quarters, which is a positive sign of the private sector's confidence in the state's resources sector.

SNL Image

Vivek Dhar, a mining and energy commodities analyst with Commonwealth Bank of Australia, described the return of confidence in the sector as a "cautious recovery", and expected a real turning point will come when projects under exploration start securing funding and beginning construction.

"We have been in consecutive years of falling exploration [spend]," Dhar said. "[There] is no guarantee of the supply given the lag.

"But it is a sign that supply is responding to higher prices, which was a concern in the last two years. Because we saw prices rebound almost 18 months ago, but only now has exploration started to turn the corner," he added.

Dhar noted that the declines in licenses could also be a result of producers moving to focus on larger deposits or consolidating existing projects. "Bigger projects are being looked at so the numbers might be different," he said. "A lot of projects are moving to the feasibility stage. I think that's why you see a lot more interest in other licenses."

AMEC's Pearce also believes companies are reviewing projects as the sentiment improves for the sector. "We are moving from where it has been fewer exploration for the last few years towards … where [companies] have to decide which of the projects they are going to try to increase production," Pearce said.

Alongside the resurgence in exploration, the number of refused, lapsed, rejected or withdrawn program of work applications in Western Australia surged by 241% year over year in the fourth quarter.

Pearce believes that reviews of existing assets may explain the surge. "Some of them seem to be filing of applications to withdraw [certain projects] because of strategic choices," he said.

Commenting on the increase in failed applications, the mining department's Caple said it may relate to the government's transition toward a new application method. The official added that under the current digital system, users have to withdraw applications containing errors and resubmit a correct application, as they cannot edit the forms once they were submitted.

While the government has been supporting companies to move through the approval process and to reduce time frames, Pearce said that more policy setting and incentives are needed to build up momentum, especially for the lithium segment.

"I think what we are looking at is not a boom," Pearce said. "At the moment, we are at the beginning of what feels like a good period."