(1,138 Companies' Budgets Totaling $3.55 Billion)
by Region, 2003-2004 (US$ millions)
Metals Economics Group
P.O. Box 2206
Halifax, Nova Scotia B3J 3C4
CANADA
Phone: (902) 429-2880
Fax: (902) 429-6593
meg@metalseconomics.com
www.metalseconomics.com
(all dollar figures are US$)
According to Metals Economics Group's recent edition of Corporate Exploration Strategies, this year's analysis of 1,138 companies' exploration budgets (using a budget cutoff of $100,000) totals $3.55 billion, covering an estimated 95% of worldwide commercially oriented nonferrous expenditures. When we also include estimates for budgets that we could not obtain, our estimate of total 2004 expenditures for commercial nonferrous metals exploration is almost $3.8 billion.
Worldwide nonferrous exploration budgets steadily increased through the early 1990s to a crest of $5.2 billion in 1997, before falling for five straight years to a 12-year low of $1.9 billion in 2002-an overall decline of more than 63%. Since that time, exploration budgets have risen for two straight years, rebounding to a level just slightly above our 1998 estimate. This year's $3.8 billion estimated total is up 58% over last year's, and is double the estimated worldwide total seen at the bottom of the cycle in 2002.
Prior to last year's increase from the bottom of the cycle in 2002, substantial cutbacks by the majors, the negative impact of industry consolidation, and a loss of funding for a great number of junior companies together contributed to five straight years of declining exploration spending. Last year's initial increase in worldwide exploration allocations by surveyed companies was in large part due to the combination of increased spending by the majors as they recognized the dearth of new projects moving up the pipeline, a significant reduction in the negative influence of industry consolidation on exploration from the peak consolidation levels seen in 2000 and 2001, and two consecutive years of increased spending by junior companies on the back of increased gold prices and rising investor interest. As the rise in gold prices took hold and prices for other commodities strengthened in late 2003 and early 2004, continued budget increases by most major companies and increased availability of capital to the juniors continued to push worldwide exploration spending higher in 2004, to more than double the total seen in 2002. Exploration budgets by junior companies included in our study are up 103% this year, accounting for about 60% of the overall increase in exploration allocations and almost 45% of the overall exploration total by all surveyed companies.
Although metals prices are expected to experience increased volatility in the near term and may come down off recent highs, continued low inventories and a lack of significant new production in the pipeline, combined with China's as-yet undiminished appetite, should provide adequate support to keep base metals at attractive levels for the near future. In addition, most analysts expect that the U.S. dollar will remain soft in the near term, which, combined with other global uncertainties, should continue to support the gold price.
If metals prices remain relatively high in the current cycle, the increased rate of junior financings over the past 12-18 months should continue. While the juniors are spending a substantial portion of the money raised over the past year on this year's programs, many have already replenished their coffers to fund exploration programs that will run into next year. While we don't expect to see further substantial increases in exploration spending by major companies in 2005, we anticipate that growing spending by junior and intermediate companies will lead to an increase in overall spending again next year, although at a more modest rate than seen this year.
The figures below illustrate the regional distribution of the $3.55 billion in exploration allocations by the 1,138 companies included in this year's study and the comparison with the $2.19 billion budgeted by 917 companies in 2003.
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Worldwide Nonferrous Exploration Spending by Region 2004 (1,138 Companies' Budgets Totaling $3.55 Billion) |
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Worldwide Ferrous Exploration Spending by Region, 2003-2004 (US$ millions) |
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Exploration allocations by surveyed companies have increased in each of our regional categories and classifications for the second consecutive year. In dollar terms, budgets increased the most this year in our rest-of-world category, led by sharp increases in Russia, Mongolia, and China; Latin America, led by increased spending in Peru and Mexico; and Canada.
Latin America continues to be the most popular destination for exploration spending, increasing its lead over second-place Canada to more than $76 million this year from the $46 million margin in 2003. Africa remains in third place by region, having surpassed Australia for the first time in 2003. The substantial increase in allocations in our rest-of-world region have outstripped a more moderate recovery in Australian spending, moving the region to fourth place with Australia slipping to fifth. Before beginning its gradual slide in recent years, Australia had held second place by region from 1994 to 2001, when Canada displaced it for the first time. The United States and the Pacific/Southeast Asia region remain in sixth and seventh place, respectively, positions they have held since 2001.
These are some of the conclusions drawn from Metals Economics Group's fifteenth edition of Corporate Exploration Strategies, published in October 2004. Corporate Exploration Strategies examines the nonferrous exploration activities of all mining companies worldwide. Volume I provides a ten-year summary of trends in exploration spending and an industry-wide analysis of allocations by location, target, stage of development, and more. Volume II reports each company's exploration budget by country, target, and stage of development. Companies planning to spend more than US$5 million are given special attention-each company's current exploration program, strategy, and most advanced exploration projects are profiled in detail. The study also includes an appendix of companies that do not have exploration budgets but which do have significant exploration projects for which they are seeking financing or joint ventures in 2004.
This 900-page two-volume study is now available (on the internet and in print) for US$12,000 from Metals Economics Group, P.O. Box 2206, Halifax, Nova Scotia, B3J 3C4, Canada. phone: (902) 429-2880; fax: (902) 429-6593; email: meg@metalseconomics.com; web site: www.metalseconomics.com
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Copyright by Metals Economics Group 2004. All rights reserved. Reproduction in whole or in part without written permission is prohibited. MineSearch and Corporate Exploration Strategies are registered Canadian trademarks. |