General Kinnematics

Exploration budgets fell in 2013

October 29, 2013

A new report from SNL Metals Economics Group found that exploration budgets for nonferrous metals fell by an estimated 29 percent in 2013. The report, “Corporate Exploration Strategies,” found that the falling budgets are worldwide.

In all, exploration budgets dropped to US$15.2 billion in 2013 from $21.5 billion a year earlier, the SNL study found.

Junior exploration budgets fell 39 percent year over year, with its share of overall exploration falling to 34 percent from an all-time high of 55 percent in 2007. "Since early 2012, junior companies have struggled to attract investor interest, and have been forced to rein in spending as their coffers become depleted," SNL said in an statement that can be found here.

Exploration budgets for major mining firms, meanwhile, dropped by 24 percent from 2012 levels, which SNL attributed to higher operating and capital costs, as well as shareholder pressure.

"Although most metals prices remain at or near 10-year averages, higher operating and capital costs, along with pressure from activist shareholders, have required major companies to focus on a return to healthy margins after years of growth-oriented spending," the study said.

The exploration that is still going has been focused on medium- and high-risk regions, the study found. These regions continue to have issues with security, government policy, taxation and resource nationalism.

Budgets allocated to stable mining jurisdictions such as Canada and the U.S. dropped, with Canada-focused mining falling 41 percent and U.S.-centered mining dropping 38 percent.

SNL also predicted that the pool of early- and late-stage assets available for sale is "likely near an all-time high" as many companies face difficult financial and strategic choices, but noted that potential buyers — such as mid-tier producers, new industry entrants, or companies based in emerging economies — have yet to take advantage of that situation.

“The Corporate Exploration Strategies” study included stated and estimated exploration expenditures from more than 3,500 companies related to precious and base metals, diamonds, uranium and some industrial minerals; the study excluded iron ore, aluminum, coal and oil and gas.


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