Total spending allocated for worldwide exploration of nonferrous metals increased steadily from 1993 to 1997, when it peaked at an estimated US$5.2 billion, according to Halifax, N.S.-based Metals Economics Group’s 11th edition of Corporate Exploration Strategies.
The upward trend dramatically reversed in 1998, when exploration spending declined by 29%. This trend continued in 1999, when spending decreased a further 24% to US$2.8 billion.
This year, however, shows a modest decline to US$2.6 billion, a drop of 7%. (MEG estimates that this year’s analysis of 656 companies’ exploration budgets, totalling about US$2.34 billion, covers 90% of worldwide expenditures for commercially oriented nonferrous metals exploration; total expenditures in 2000 are estimated at US$2.6 billion.)
The accompanying graph illustrates the regional distribution of the US$2.34 billion in exploration allocations by the 656 companies included in this year’s study.
MEG expects exploration budgets to continue at a reduced level in the near term, but we appear to be nearing the bottom of the cycle. Although the gold price continues to languish, base metals and platinum group metals prices have shown signs of significant upswings since mid-1999. With the world’s economies showing vitality and robust growth in metals consumption (demand for copper, for instance, increased by 8% through the first half of 2000), base metals prices are expected to continue to show strength. But because budget increases tend to lag behind improvements in metal prices by a year, it will take some time to undo the effects of lost liquidity in the equity markets for junior explorers and reverse the effects of exploration budget cuts and departmental layoffs by most majors.
Latin America is again maintaining its top position as a destination for exploration spending, with the surveyed companies budgeting US$661.9 million this year (28.3% of the total); Australia, US$404.8 million (17.3%); Canada, US$348 million (14.9%); Africa, US$293.1 million (12.6%); the U.S., US$234.5 million (10%); and Pacific/Southeast Asian countries, US$199.2 million (8.5%). Spending in the rest of the world is a combined US$196.7 million, including about US$90.1 million for Europe, US$34.9 million for Asia, US$33.9 million for the Commonwealth of Independent States, US$8 million for the Middle East, and $29.8 million for other areas worldwide.
Canada is going against the worldwide trend of lower exploration spending and is the second-largest destination for exploration spending on a regional basis. Canadian projects are receiving US$348 million this year, a 12.2% increase over the US$309.9 million spent in 1999. This increase is mainly due to diamond and platinum exploration. Allocations for Southeast Asia also increased slightly in 2000, to US$199.2 million, compared with US$196.1 million a year ago.
Although Australia is spending more on exploration than any other country in 2000, at the same time, this year’s allocations represent the biggest decline. This year, money budgeted Down Under totalled US$404.8 million, down from US$495.3 million in 1999, a decrease of US$90.5 million. This is well above the average decrease worldwide.
Africa shows the second-largest decrease in spending, falling to US$293.1 million in 2000 from US$377.1 million last year, a drop of US$84 million.
Meanwhile, Latin American allocations fell to US$661.9 million in 2000 from US$719.4 million in 1999, a decline of US$57.5 million.
Smaller decreases in spending are taking place in the U.S. and the rest of the world. Exploration spending for the U.S. shrank to US$234.5 million from US$252.1 million a year ago, a decrease of US$17.6 million. The Metals Economics Group’s rest-of the-world category show the smallest decrease in spending, falling US$16 million, to US$196.7 million in 2000 from US$212.7 million in 1999.
Latin
America 28.3%
US$661.9 million
Where Exploration Dollars are Spent
Australia 17.3%
US$404.8 million
Rest of the world 8.4%
US$196.7 million
United States 10%
US$234.5 million
Canada 14.9%
US$348 million
Africa 12.6%
US$293.1 million
SE Asia 8.5%
US$199.2 million
Percentage of
global exploration
spending
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