Exploration
Mineral exploration, traditionally undertaken largely by juniors, has become too expensive in current markets. This has seen the majors leading the way in this area

International – In 2014, 39 larger [global] players budgeted a total of US$4.33 billion and accounted for 40% of the $10.74 billion worldwide mineral exploration total.

This information is according to an SNL Metals & Mining report and is part of the 25th edition of its Corporate Exploration Strategies (CES) study, which showcases a corporate exploration profile of each company budgeting at least $50 million for exploration.

The top three explorers in 2014 include one copper producer (Antofagasta), a diversified major (Vale), and a major precious metal producer (Fresnillo).

Chile-based Antofagasta has the world’s largest non-ferrous exploration budget in 2014; this year’s programme is growth-oriented and emphasizes late-stage and feasibility work. A strong grassroots effort includes programmes in the Americas, Europe, Africa, and Australia.

In second place, Vale is the largest explorer among the diversified majors, also with an emphasis on late-stage work. Vale continues to challenge Norilsk for the title of world’s top nickel producer; its output of 260 200 Mt in 2013 was just 25 000 Mt short of the 285 000 Mt produced by the Russian miner. Vale also considers copper one of its core commodities, although production growth has been more gradual.  Significant exploration spending is also directed to fertilizers in Brazil and Peru.

Rounding out the world’s top three is Mexico’s Fresnillo; formed through a spin-off of Industrias Penoles’s precious metals assets. Fresnillo is the world’s largest primary silver producer and one of Mexico’s largest gold producers. Directed almost entirely to Mexico, Fresnillo’s budget is spread fairly evenly between all stages of exploration, with a slight emphasis on advancing several pipeline projects.

Together, the 39 larger players are contributing 40% of the worldwide exploration total in 2014, with gold representing 41%, copper 32% (base metals 41%), and 7% each for diamonds and other targets (including silver, potash, phosphates, and manganese).

Two of the larger players, Alrosa and De Beers, account for 69% of worldwide diamond exploration. The 25 larger players with gold exploration budgets are responsible for 39% of worldwide gold allocations.

The group’s copper explorers account for just over half the total copper budget.

Conventional wisdom holds that the major companies leave grassroots exploration to the juniors. It may therefore be surprising that the larger players are contributing 40% of all Greenfields allocations in 2014.

A persistent financing drought has squeezed juniors’ budgeting to the point that the majors have become the biggest drivers of early-stage exploration. Similarly, the larger players traditionally dominate minesite spending; in 2014, however, they account for only 51% of the near-mine work as their investors demand improved returns over growth.

It is also interesting to note that the larger players are responsible for just 32% of late-stage exploration and feasibility work.

Geographically, the larger players have allocated their budgets somewhat differently than the overall group of 1 961 companies.

The top-ten target countries for the larger players are the same as for the overall group. However, for the larger players Chile replaces Canada as the primary exploration destination, as their Chilean budgets account for a much larger share (12%) than the entire industry’s share (6.6%), reflecting the significant presence of major copper miners in the relatively secure Latin American country.

Two of the mature jurisdictions, Canada and Australia, have garnered much smaller percentages (10% and 7.5% respectively) of the larger players’ budgets than the shares allocated by the entire industry (14% and 12% respectively), as junior and intermediate companies contribute a considerable portion of the exploration dollars spent in these countries.

The United States has also dropped in the rankings, although budgets by the larger players account for a greater share (8.4%) of the total than the share allocated by the group of 1 961 companies (7.1%).

Russia has moved up in the rankings, from eighth to fourth place, with 79% of its total allocations coming from seven larger players.

Conversely, China, where 56 companies with allocations of less than US$20 million are contributing 53% of the total, drops from sixth to tenth place.

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