Decline in exploration spending continued in 2014

The following is an edited excerpt from SNL Metals & Mining’s 2015 World Exploration Trends report. For more information, please visit www.snl.com.

 

Mining companies responded to last year’s poor market conditions with a sharp reduction in their exploration activity. The result was a 26% decline in worldwide nonferrous metals’ exploration budgets in 2014, compared with the previous year.

In the twenty-fifth edition of its Corporate Exploration Strategies (CES) report, SNL Metals & Mining calculated that the mining industry’s total budget for nonferrous metals exploration was US$11.4 billion in 2014. This contrasts with the US$15.2 billion allocated in 2013 and the record US$21.5 billion budgeted in 2012.

The steep plunge in exploration budgets was due to a combination of investor wariness of the junior sector, which made it difficult for most companies to raise funds, and a strong pullback by producing companies on capital and exploration spending to improve their margins.

SNL’s 2014 exploration estimate was based on information collected from more than 3,500 mining and exploration companies worldwide, of which almost 2,000 had exploration budgets reported in the CES study. These companies (each budgeting at least US$100,000) together allocated US$10.7 billion for nonferrous exploration, which SNL estimates covers 95% of worldwide commercially oriented nonferrous exploration spending. Adding estimates of budgets that SNL could not obtain, the 2014 worldwide total exploration budget reached US$11.4 billion.

Although iron ore exploration remains outside the scope of the CES, and is not included in the analysis throughout the rest of this report, SNL began coverage of iron ore explorers in 2011 (surveying companies for their total ferrous budgets above the core targets detailed in the CES).

Including the allocations by a number of pure iron ore producers and explorers that were not otherwise part of the study, SNL compiled a total exploration budget of US$1.4 billion for iron ore in 2014, down from US$1.7 billion in 2013 and US$2.9 billion in 2012. Aggregating the iron ore budgets with the budgets for the other commodities covered by the CES, the total 2014 exploration budget rises to US$12.2 billion, of which 12% is attributable to iron ore.