Global spending on the search for non-ferrous metals rose to an estimated US$8.4bn in 2017 – compared with US$7.3bn in 2016 – representing the first annual increase in exploration spending after four consecutive years of declining investment in this area, according to the World Exploration Trends (WET) report from S&P Global Market Intelligence.

 

Speaking of the sector’s performance last year, Mark Ferguson – Associate Research Director at S&P Global Market Intelligence – noted: “Improved equity market support for explorers allowed many companies to launch or resume drill programmes on their most promising projects. 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,” he observed. “In the last quarter of 2017, there was a sharp increase in reported drill results, and financings closed the year on a high note.  As a result, our year-end measure of exploration sector activity reached levels not seen since early 2013.”

 

“Despite significant market volatility, the generally positive trend in metals prices has continued in early 2018,” he continued. “We therefore expect the global exploration budget for 2018 to increase by a further 15–20 per cent year-over-year.”

 

Key takeaways

 

Key takeaways from the report, which was released in conjunction with this year's Prospectors & Developers Association of Canada (PDAC) International Convention, include sure signs of life in the sector: after four years of depressed exploration spending, the mining industry upped aggregate non-ferrous exploration budget to US$7.95bn by surveyed companies — a 14-per-cent increase over 2016.

 

However, reflecting funding challenges faced by some junior companies early in the year, the number of explorers with spending plans declined slightly, by three per cent year-over-year to 1,535 companies.

 

The report also found that producers are restricting exploration. Major miners (with revenues of more than US$1bn) continue to allocate only a small proportion of their revenues to exploration efforts. Riskier exploration remains relatively unattractive.

 

Canada, Australia and the US continue to lead exploration spending: with allocations totalling US$5.55bn. The top 10 countries accounted for 70 per cent of the US$7.95bn global surveyed total.

 

Gold led the way to a higher global budget in 2017. Meanwhile, battery metals exploration surged: lithium exploration allocations in 2017 more than doubled year-on-year, while cobalt-focused exploration also increased strongly.

 

The report noted that the health of the exploration sector is improving: S&P Global Market Intelligence's measure of exploration activity, the Pipeline Activity Index, jumped to 87 in Q4 2017 from 77 in Q3 2017 – the highest since Q1 2013, when the recent downturn was just kicking in.