#Exploration for nonferrous #metals down 25% SNL.com @Mineweb

Spending drops to $11bn, close to 10 year low. 

As usual, companies "are sacrificing long-term project pipelines in favour of consolidation and maximising returns.” 

Exploration for nonferrous metals down 25% - SNL

BASE METALS

Global exploration for nonferrous metals has fallen sharply again this year – by 25%, according to data collected by SNL.

Author: Lawrence Williams
Posted: Wednesday , 22 Oct 2014 LONDON (Mineweb) -

The mining cycle downturn is in full swing now, just preparing the ground for big price increases when the cycle turns given that current fall-offs in capital spending and exploration are bound to result in serious metals supply shortages, and correspondingly much higher prices when these shortages develop. Sure, there may be a global recession but this tends to mean slower, not negative, growth rates for the most part. Given that mining is an industry dependent on replacing ever-depleting assets as orebodies are worked out and grades decline then these fall-offs in asset replacement expenditures mean serious supply problems down the road.

The graph below from acquisitive research giant SNL whose Metals & Mining division has, in recent years, absorbed both Canada’s Metals Economics Group and Australia’s Intierra (and with the latter Sweden’s Raw Materials Group) gives a pretty clear picture as to what has been happening in the key nonferrous metals exploration sector. After peaking in 2012, exploration expenditures have been declining rapidly and look to be heading down possibly to a ten year low point should the trend continue - and with no succour seen ahead for the junior exploration sector which, in the past, has provided up to 50% or more of the global exploration spend, then the sharp fall seems likely to continue.



In data compiled for SNL’s forthcoming "Corporate Exploration Strategies" study, the group estimates the worldwide total budget for nonferrous metals exploration as having dropped to US$11.36 billion in the current year from $15.19 billion in 2013 — a 25% decrease.  And 2013 had seen an even bigger percentage fall from the record 2012 level. The SNL nonferrous exploration category refers to expenditures related to precious and base metals, diamonds, uranium and some industrial minerals; it specifically excludes iron ore, aluminium and coal.

SNL notes that calls for mining companies to improve profit margins in the face of rising costs and falling grades has led to the industry’s major miners divesting noncore assets and cutting back on capital project and exploration spending.  This has led to a 25% drop in the majors' exploration budget total alone this year. Meanwhile the junior sector has been faring even worse as exploration focused companies battle to stay afloat in the light of rock bottom share prices and, as a group, have been reining in spending in order to conserve funds. SNL puts the fall-off in junior total exploration spending as being 29% year over year in 2014 after falling 39% in 2013, dropping their share of the overall budget total to 32% from a high of 55% in 2007.

And for operating miners in particular it is noticeable that the pattern of exploration has been altering with a concentration on ‘mine site’ exploration following the old adage that the best place to look for new mineral deposits is adjacent to existing ones. Thus brownfield expenditure has been far more prevalent in the exploration mix as this is seen as a less costly way of replacing and adding reserves.  But it does tend to preclude the finding of additional mega deposits which the industry needs to maintain output into the future.

Gold has always tended to be the most significant nonferrous metal as far as exploration is concerned and there are always far more gold exploration juniors than base metals ones. But three years of declining gold prices have taken their toll and the proportion of gold exploration expenditure, while still the largest sector, has declined by 31% year on year to 43% while the collective share of base metals in the mix has actually seen a 2% increase although total base metals expenditure has fallen overall by around  $1 billion.

SNL concludes a release on the latest findings with the comment, “This reduced focus on early stage and generative work has led to concern that many companies, and perhaps the industry in general, are sacrificing long-term project pipelines in favour of consolidation and maximising returns.” But this has always been the case with mining accounting for the industry’s ever repeating cyclical profit pattern.

To contact SNL for more information click on www.snl.com 

Exploration for nonferrous metals down 25% - SNL - BASE METALS - Mineweb.com Mineweb



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