- The global nonferrous exploration budget fell for the first time in three years, declining US$300 million year-over-year, or 3%, to US$9.8 billion.
- A key cause of budget falls was merger & acquisition activity.
- Base metals spend was to outpace gold with budgets for the precious metal declining US$559 million, or 6%, to US$4.29 billion.
- Australia had the largest budget increase and is to spend more than Canada for the first time since 2001.
Difficult market conditions and high-profile M&A activity have unsurprisingly impacted budgets the most, as the amount of money being raised by companies dropped sharply from November 2018 through February of this year.
S&P Global Market Intelligence metals and mining research associate director Mark Ferguson
S&P Global Market Intelligence metals and mining research has found global exploration budgets for 2019 have declined by US$300 million, or 3%, year-on-year as Australia became the only top-4 region by forecasted exploration spend to increase its annual budgets.
According to the S&P data published as part of its Corporate Exploration Strategies series, Australia became number two region in budgetary stakes and will spend more in 2019 than Canada, outpacing the North American country for the first time since 2001.
S&P Global Market Intelligence metals and mining research associate director Mark Ferguson highlighted a number of causes of reduced global exploration budgets and flagged the outfit’s expected outlook for next year.
Ferguson said, “Difficult market conditions and high-profile M&A activity have unsurprisingly impacted budgets the most, as the amount of money being raised by companies dropped sharply from November 2018 through February of this year.
“As the market remains volatile, we anticipate exploration budgets remaining relatively flat in 2020, as any increase to gold budgets will likely be offset by lower allocations to other commodities.”
Budgets decline after major mergers
Global exploration budgets have declined for the first time since 2016, with spending flagged to fall US$300 million year-over-year, or 3%, to US$9.8 billion.
Exploration budgets previously declined globally in 2013-16 after they hit their highest levels in 2012, in 13 years of data measurement.
After major companies merged this year, their post-merger budgets tended to be dramatically lower.
Among the mergers making an impact were the Newmont-Goldcorp and Barrick Gold-Randgold mergers which took $102 million or about a third of the exploration budget decline out of the market.
Newmont Goldcorp Corp (NYSE:NEM) (FRA:NMM) (TSE:NGT) (SWX:NEM) cut US$48 million in exploration funds from its budget after its merger while Barrick Gold Corp (NYSE:GOLD) (TSE:ABX) (ETR:ABR) (BCBA:ABX) shaved US$54 million from its exploration budget, when comparing the annual spends to the companies’ 2018 budgets.
S&P has seen positive trends in the market in recent times.
Ferguson said, “We are encouraged … by some positive signs, such as the rising number of active companies and copper recording a year-over-year increase.”
Research outfit S&P’s 2019 dataset measured US$9.29 billion in budgetary allocations by companies and also estimated totals for companies that spent less than US$100,000 and private companies that do report their data.
Base metals budgets grow
Gold explorers shaved cash off their exploration budgets as the global price for the metal increased and gold-in-ground valuations improved.
Budgets for gold exploration declined US$559 million, or 6%, to US$4.29 billion.
Base metals budgets meanwhile improved, led by copper which increased US$245 million, or 11%, to US$2.32 billion.
Nickel budgets also increased, by US$54 million, or 18%, to US$351.6 million.
Explorers in the diamond sector had their first exploration budget increase in six years while budgets for other commodities mostly decreased slightly, except zinc which fell by US$108 million, or 16%, to US$564 million.
Australian tops Canada
Australia had the second-largest budget for exploration efforts worldwide and had the largest budget increase of geographic regions globally.
The nation’s budgetary allocations made Australia the second-largest exploration region by budget in 2019, adding US$199 million, or 15%, to budgets to end with US$1.53 billion for exploration budgets.
Australia topped Canada in the exploration budget stakes for the first time since 2001 and the Rest of World region for the first time since 2003.
Latin America was the number-1 exploration region worldwide for 2019 and its budget declined by US$117 million, or 4%, to US$2.62 billion.
Number-4 region Canada’s budgets declined by a larger US$134 million, or 9%, to US$1.31 billion.
Europe and Asia’s budgets also declined, by an even larger US$241 million, or 14%, to US$1.44 billion.
Australia was the only region of the top 4 that planned on spending more on exploration this year.