S&P Global Market Intelligence’s annual World Exploration Trends Report was released this week and shows that the global budget for nonferrous metals exploration decreased 11% to an estimated $8.7 billion in 2020 from $9.8 billion in 2019.
The total exploration budget of $8.7 billion includes estimates for companies budgeting less than $100,000 and private companies. Over half of that amount was dedicated to gold projects, while copper ventures received 21% of the total and zinc/lead projects 5%.
According to the New York-based firm, exploration budgets decreased modestly in 2020 for two main reasons: first, travel restrictions and lockdowns in response to the covid-19 pandemic, and second, an acute decrease in metal prices in March 2020, stemming from expectations of reduced demand.
“The mining industry managed to navigate through market complexities and capitalize on rebounding prices and easing restrictions as 2020 progressed,” Mark Ferguson, research director at S&P Global Market Intelligence, said in a media statement.
“The decline in the 2020 exploration budget was far less steep than initially anticipated at the end of the March quarter when the global spread of covid-19 was surging.”
Among the commodities covered by the report, only gold posted a modest 1% increase in exploration budgets year over year, while budgets declined for the industrial metals, led by copper, zinc, lithium and cobalt.
When it comes to the global exploration budget for companies aggregated by country of headquarters, Canada and Australia led the way with $2.87 billion and $1.67 billion respectively, although with a negative y-o-y change of -0.5% and -12.5% respectively.
In terms of assets, S&P found that the trend towards advanced and minesite assets was more pronounced in 2020, as it tends to happen during downturns.
“Minesite exploration proved resilient, slipping by only 4%, or $147 million, year over year despite covid-19-driven uncertainty. Minesite exploration accounted for 41% of the global budget — a second consecutive all-time high — while grassroots and late-stage budgets were down by 19% and 10% respectively from 2019,” the report reads.
Major miners dominated exploration spending at $4.4 billion and were followed by juniors at $2.54 billion, intermediates at $1.05 billion and government at $0.5 billion.
The report also shows that junior and intermediate companies were successful in raising funds last year, with the $11.2 billion raised in the year, the highest total since 2012.
“Notably, December 2020 was the first month since August 2019 in which gold did not account for the largest share of the total raised. While the bulk of the year’s funding was raised on the TSX, which accounted for $5.5 billion, the ASX had a record-setting year at $4.3 billion,” the analysis states.
“Financings recovered sharply as the year progressed, with the $5.8 billion raised in 2020 the highest total since $6.3 billion in 2011, indicating that companies likely overspent in 2020 compared with their 2020 budget.”
Despite remaining uncertainties, the World Exploration Trends Report expects 2021 to perform better and reverse the pandemic-induced losses of 2020.
“Should metal prices continue to remain strong over the next several months, it is likely that the 2021 exploration budget will be stronger, rising by 15%-20% year over year,” Ferguson predicted.