According to SNL Metals & Mining's 26th edition of Corporate Exploration Strategies (CES), the estimated worldwide total budget for nonferrous metals exploration dropped to $9.2 billion in 2015 from $11.4 billion in 2014 — a 19 percent decrease and the lowest total since 2009.
SNL Metals & Mining's 2015 exploration data and analysis are based on information collected from nearly 3,500 mining and exploration companies worldwide, of which almost 1,800 had exploration budgets for 2015. The companies (each budgeting at least $100,000) budgeted a total of $8.77 billion for nonferrous exploration in 2015. Including SNL's estimates for budgets that could not be obtained, the 2015 worldwide exploration budget totals $9.2 billion. (Note: 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.)
Although the recent fall in metals prices has captured public attention, prices have actually been declining since 2011, and along with them exploration budgets, which began falling in 2012. Major companies have been tackling higher operating and capital costs, lower ore grades, uncertain demand for commodities and investor discontent for several years, but deteriorating metals prices and weak economic forecasts have forced further cuts to growth-oriented spending. To that end, the majors have been cutting back on capital project and exploration spending, which has led to a third consecutive annual drop (18 percent) in the majors' exploration budget total in 2015. The juniors continue to fight for what little investor interest remains, forcing the group to rein in spending again in 2015; many have elected to leave the industry altogether. As a result, the juniors' total exploration budget fell 26 percent year on year in 2015 after falling 29 percent in 2014, dropping their share of the overall budget total to 29 percent from a high of 55 percent in 2007.
Given the lack of funding for the junior sector, and a focus on less risky assets, the budget share devoted to exploration at and near mines continues to rise, accounting for 34 percent of the total, to the detriment of both grassroots (29 percent) and late-stage (37 percent) exploration. This reduced focus on early-stage and generative work is fueling concern that many companies — and perhaps the industry in general — are sacrificing long-term project pipelines in favor of consolidation and maximizing returns.