The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News – March 9, 2018
Raising C$41 million early in 2017, including a C$35 million strategic investment by Goldcorp, provided Auryn Resources with the funding to carry out major exploration programs in Canada and Peru. This drill is testing the Anuri prospect on the company's Committee Bay gold project in Nunavut.
As part of its strategy to focus its own exploration on quality brownsfield assets, Kinross Gold recently announced a major pit expansion at its Fort Knox gold mine in Interior Alaska.
After four years of declines, global minerals exploration spending rose roughly US$1 billion in 2017 and is expected to see further growth this year, according to a March 5 report by S&P Global Market Intelligence.
The 1,535 companies that answered a survey put out by the research firm reported US$7.95 billion of investment in the search of nonferrous metals in 2017, a 14 percent increase from the US$6.95 billion spent in 2016. Taking into account data that could not be acquired and the spending from very small explorers, S&P estimates that last year's mineral exploration spending was around US$8.4 billion.
"Improved equity market support for explorers allowed many companies to launch or resume drill programs on their most promising projects," said Mark Ferguson, associate research director, S&P Global Market Intelligence.
With funds available to exploration companies and metals prices continuing to improve, the research firm foresees a similar rate of growth this year.
"Despite significant market volatility, the generally positive trend in metals prices has continued in early 2018; we therefore expect the global exploration budget for 2018 to increase by a further 15 to 20 percent year-over-year," Ferguson added.
Such a rise would put global nonferrous mineral exploration spending somewhere around US$10 billion this year.
Despite two years of healthy gains, the projected 2018 spending will be less than half of the record US$21.5 billion invested in mineral exploration investments made in 2012.
This indicates a large potential for continued growth in the sector moving forward and demonstrates just how sharply mineral exploration spending fell – roughly US$14.2 billion – in just four years.
S&P Global Market Intelligence "World Exploration Trends" report, however, cautions that the recovery in funds available to junior exploration companies could take longer than the fall.
Top destination: Canada
At around US$2.8 billion, Canada, Australia and the United States accounted roughly 35 percent of all global nonferrous mineral exploration spending in 2017.
For the 16 years straight, Canada has been the top destination for explorers and last year was no exception.
Minerals exploration investments across the Great White North was roughly US$1.1 billion, or about 13.8 percent of the global spending in 2017. Nearly half of the money spent on exploring Canada's rich mineral endowment was invested in the eastern provinces of Quebec and Ontario.
Australia is chipping away at Canada's long-held lead as the top minerals exploration destination in the world.
Investments in Down Under mineral exploration was nearly US$1.1 billion, or roughly 13.6 percent of global total for 2017. According to S&P Global Market Intelligence's figures, this puts Australia just US$25 million behind Canada for minerals exploration spending.
At roughly 65 percent, or about US$700 million, Western Australia was by far the most popular Down Under destination for seeking minerals.
At about US$612 million, or about 7.7 percent of the global share, the United States was a distant third when it comes to minerals exploration.
Nevada, the top exploration destination in the U.S., accounted for nearly half, 47 percent of this total.
Nevada, Arizona and Alaska were the top three mineral exploration states, accounting for 73 percent of the mineral exploration spending in the U.S. last year.
At roughly US$94.1 million, Alaska accounted for about 15 percent of the exploration spending in the U.S., according to preliminary data compiled by the state's Division of Geological & Geophysical Surveys.
Main focus: gold
What are mining and mineral exploration companies looking for with their increased budgets?
As it turns out, just over half the exploration spending, US$4.05 billion, was invested in search of gold in 2017.
In fact, gold accounted for 73 percent of the increase in exploration spending from 2016 to 2017, according to S&P Global Market Intelligence.
Roughly 30 percent of the global exploration spending, or about US$2.4 billion, was used for the search of new economically viable base metals – copper, gold, zinc and lead – deposits.
Diamonds and uranium each accounted for 3 percent of exploration spending, or about US$239 million, last year.
One interesting trend is a sharp increase in the search of metals used in lithium-ion batteries.
"Although the main focus was on gold, exploration targeting base metals assets also rebounded in the second half of the year, and the battery metals attracted particular attention," Ferguson said.
The search for lithium itself accounted for US$157 million in explorations spending in 2017, roughly double the spending in 2016.
While a much smaller share of the overall market, the US$36 million invested in exploring for cobalt, used as a cathode material in lithium-ion batteries, was a staggering fourfold increase in just a year.
Cobalt is a byproduct metal in many types of copper deposits and the rise in the demand for this battery metal has many mining and mineral exploration companies evaluating the cobalt component of their copper deposits.
As an example of this growing interest, Trilogy Metals Inc. is testing the viability of recovering the cobalt component of its Bornite deposit in Northwest Alaska.
"If it is determined that it can (be concentrated into a saleable product), then cobalt will be added to the resource base as a potentially valuable metal which could enhance the value of the possible Bornite ores," said Trilogy President and CEO Rick Van Nieuwenhuyse.
Exploration outlook: measured growth
While the gains in exploration spending over the past year is a good sign for the companies looking to raise money for the search of minerals and the regions that stand to benefit from rising exploration investments, S&P Global Market Intelligence foresees measured growth for the sector.
One reason for this is that major mining companies and investors in the mineral exploration sector have shied away from putting money towards the riskier grassroots exploration.
"A long-term swing away from grassroots exploration has been exacerbated since 2013 by a combination of scarce funding for junior explorers and spending cuts by the majors," the research firm wrote in its mineral exploration report. "Although improved market sentiment over the past 18 months seems to have slowed the decline in grassroots exploration's share of budgets in 2017, another year of increase in the mine-site share reflects the near-term focus of many producers, as well as a persisting climate of risk aversion."
This cautious approach by investors, coupled with producing companies focusing their efforts on advanced exploration projects or adding reserves at existing operations, means that it could remain much tougher for junior exploration companies to raise funds for promising early-stage projects than it has been in the past.
So, while the global minerals exploration sector is improving, the mineral exploration companies with the most promising advanced stage projects and a proven track-record will likely draw the most investments during this risk adverse recovery.
Editors Note: This article was updated to read: "Canada, Australia and the United States accounted roughly 35 percent of all global nonferrous mineral exploration spending in 2017." The United States was not previously included.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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