Global exploration budget declined 3% to US$9.8 billion in 2019

NEW YORK, March 1, 2020 /PRNewswire/ -- S&P Global Market Intelligence today published its World Exploration Trends report for this year's Prospectors & Developers Association of Canada (PDAC) International Convention in Toronto. The report found that the global exploration budget for nonferrous metals decreased to an estimated US$9.8 billion in 2019 from US$10.1 billion in 2018. The decline of 3% from the previous year in planned exploration spending by the global mining industry halts a two-year rebound in the exploration sector.

The lower 2019 budget was largely the result of challenging prices for many commodities throughout the year, and by M&A activity in the gold sector that impacted the exploration priorities of the merged companies. The study further revealed that budgets for work at or near mine sites increased 7% year over year to US$3.57 billion, accounting for the largest share of the global budget by development stage for the first time.

"In 2019 we witnessed persistent trade tensions between the U.S. and China causing a marked slowing of the major economies, which triggered weaker prices for many industrial metals. However, gold emerged as a safe haven, while nickel and iron saw a sharp rise in prices owing to the significant supply-side events," said Mark Ferguson, Research Director with Metals & Mining Research at S&P Global Market Intelligence.  "The uncertainty about a near-term demand for commodities remains a hindrance to the industry. The exception to this is gold, which has benefited from the current geopolitical situation. With this in mind, we expect the global exploration budget to be flat in 2020, with gains for gold likely to be offset by weaker conditions for most other commodities."

The report highlighted that since 2018, the major mining companies have mostly maintained their allocations, while the junior and intermediate companies have been less able to raise funds for exploration. The difficulty in raising funds for the sector is reflected in the junior companies decreasing their aggregate budgets by 10% year over year and the industry becoming increasingly dependent on revenues to fund exploration.  

The persistent lack of investment in the supply pipeline is causing several base metals commodities to head toward market deficits. The findings of the study show the increased focus on later stages of exploration rather than grassroots work is having an impact, with the discovery rate of new significant deposits at historic lows.

"Unless exploration companies shift their focus back toward grassroots efforts, the dearth of large discoveries in recent years will continue, leaving the industry challenged to meet even modest global demand forecasts, especially for copper," added Mark Ferguson.

Notes to Editors
* Nonferrous exploration budgets refer to planned 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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SOURCE S&P Global Market Intelligence