FACTS ‘N’ FIGURES — Spending peak has passed

Spending on mineral exploration worldwide likely peaked in 1997, according to a report released by Halifax, N.S.-based Metals Economics Group.

Entitled Corporate Exploration Strategies: A Worldwide Analysis, the report points out that although the amount spent on nonferrous metals exploration worldwide has increased every year since 1993, the year-to-year percentage increase, which increased to 30% in 1996 from 13% in 1993, fell last year, to 11%.

This slower rate of increase, coupled with the expectation that the price of gold will remain relatively low for some time, the loss of liquidity in the equity markets for junior explorers and recent announcements by some majors to curtail exploration, indicates that 1997 may mark the peak of exploration spending for the 1990s, the report concludes.

Using a budget cutoff of $2.9-million, the report estimates that 279 companies spent $4 billion in 1997, accounting for approximately 79% of worldwide expenditures. Total expenditures last year for nonferrous metals exploration are estimated at about $5.1 billion. (The latter estimate takes into consideration budgets above $3 million that could not be obtained, exploration spending by private companies that do not publish their figures and spending by juniors of less than $2.9 million.)

In 1997, ten companies reported exploration budgets of more than $70 million, including BHP Minerals ($177.8 million), Rio Tinto ($138 million), Placer Dome ($120 million), Newmont Mining ($106.7 million), Western Mining ($100.3 million), Barrick Gold ($100 million), De Beers Consolidating Mines (about $90 million), Minorco ($73.6 million), Brazil’s stated-owned mining company, CVRD, ($72.3 million) and Avgold ($70.3 million).

The portion of budgets allocated for gold exploration slipped in the early 1990s as base metals-related expenditures rose, but gold exploration has gained ground each year since 1993.

In 1997, 251 companies spent $2.6 billion exploring for gold, compared with $2.1 billion in 1996. The increase last year echoed the bullish stock market of 1996. Due to the expected continuation of low gold prices, however, funding available for gold exploration in 1998 may be considerably less, the report suggests.

The companies that spent the most on gold exploration last year included Placer Dome ($120 million), Newmont Mining ($106.7 million), Barrick Gold ($100 million), Anglo American and Minorco ($75.2 million combined), Avgold ($70.3 million), Echo Bay Mines ($66.5 million), Newcrest Mining ($61.2 million), Normandy and La Source ($59.8 million combined), CVRD ($59.1 million), the Gutnick companies ($58.6 million), Western Mining ($57.6 million), Rio Tinto ($55.8 million), BHP Minerals ($48.6 million) and Homestake Mining ($45 million).

Base metal expenditures by 121 companies topped $1.1 billion last year, unchanged from 1996. The portion of budgets spent on base metal exploration fell to 27.1% last year from 30.8% in 1996. Copper-related expenditures by these companies totalled $686.8 million in 1997, or 62.8% of the total, compared with $655.3 million in the previous year.

Approximately 17% of the $4 billion spent on exploration last year was used to hunt for copper, down from 18.6% of $3.52 billion in 1996.

The search for new copper is expected to slow in relation to a surplus created by capacity increases at expanding producers and large new mines in Chile and elsewhere.

Companies that spent the most searching for copper in 1997 included BHP Minerals($71 million), Phelps Dodge ($48.6 million), Freeport McMoRan Copper & Gold ($42 million), Minorco ($35.9 million), Rio Tinto ($34.4 million), Noranda ($24.6 million), Western Mining ($23.3 million), Tenke Mining ($20.9 million) and Rio Algom ($20.3 million).