The second quarter SNL Metals & Mining report on the exploration market chronicles further deterioration in the sector.
But the research company sees “clear signs” of improvement and argues that the sector is “surely past its low point”.
The bad:
Quarter-on-quarter exploration activity – which has always been dominated by gold – continues to decline.
From a peak of almost 500 properties reporting drilling in November 2011, only 114 gold properties reported in June this year.
Drilling activity fell again in the June quarter and has now declined a stomach churning 32 months in a row.
Less drilling meant mineral resources and ore reserves fell again in the June quarter.
The reduction was particularly sharp for gold says the report – barely 13m ounce of new resources were announced during Q2 versus 38m additional ounces during the first three months of the year.
SNL says the reduction “was felt around the world, although the shortfall was particularly harsh in North and South America.”
The good:
SNL finds encouraging signs in the month-on-with drilling reports stabilizing at around 240 properties per month since February.
Data on new development projects – defined as the announcement for the first time of a capital expenditure commitment and a life-of-mine net present value – showed substantial improvement with 20 new feasibility studies published against just 8 during Q1.
The caveat is that the anticipated overall NPV was down 23% at $6.4 billion, and the cumulative capex was barely one-fifth of the previous quarter at $4.1 billion. Ouch.
The jump in capital raising for exploration is probably the most encouraging sign.
In the June quarter funding improved by almost a third to $555 million from $418 million in the first quarter this year and 20% more than in the year-ago quarter.
On the Toronto Stock Exchange exploration financing almost tripled to $85 million with the remainder almost equally shared between the TSX Venture and the Australian Stock Exchange.
The beautiful:
As a reminder of how good things can be in the junior mining sector SNL notes the largest share price increases (over 20 days) related to assay announcements.
Three companies reported share prices that at least doubled over the qualifying period:
Navarre Minerals (ASX:NML) rose 125% after the discovery of a supergene blanket of enriched copper in late March; Geopacific Resources (ASX:GPR) rose 113% on drilling at Kou Sa in Cambodia, and Botswana Metals doubled after drilling at Maibele North in June.
Source: SNL Metals & Mining
