Gold has followed up 2018's largest commodity increase of US$756.6 million, or 18%, with a US$559 million, or 12%, decrease in 2019 to US$4.29 billion
Gold continued to be the top target in 2019, increasing its share of global drillholes to 63% from 58% in 2018. This is the highest level since 2016.
Russia and China remained the top countries for exploration, accounting for a combined 56% of the total budget.
Budgets for Australian projects increased the most, by almost US$200 million or 15%.
Looking to 2020, the "phase one" agreement signed in January created a pause in the trade war between the U.S. and China, but significant tariffs remain in place. While macroeconomic concerns have eased somewhat, several significant events in the first few weeks of 2020 forebode considerable volatility for the year. The sharp rise in geopolitical tensions between the U.S. and Iran is unlikely to abate quickly, while politics will come to the fore ahead of the U.S. Presidential election. In addition, the emerging coronavirus epidemic could materially impact local or regional economies in China and other affected countries, and is already shaking global markets.
标准普尔全球市场情报公司（S&P Global Market Intelligence）发布的《世界勘探趋势报告》显示，有色金属全球勘查预算从2018年的101亿美元降至2019年的约98亿美元，中断了前两年勘查预算的连续复苏。
S&P Global Market Intelligence's 30th annual Corporate Exploration Strategies study found that the global exploration budget for nonferrous metals decreased to an estimated US$9.8 billion in 2019 from US$10.1 billion in 2018, interrupting a two-year recovery in budgets
Persistent uncertainty about near-term demand for commodities remains a hindrance to the industry. The outlier in this, of course, is gold, which has benefited from the current geopolitical situation. With this in mind, we expect the global exploration budget to be flat in 2020, with gains for gold likely to be offset by weaker conditions for most other commodities.
Despite an uncertain 2020, the lack of pipeline investment is leading several base metals commodities toward market deficits in the next several years. Unless efforts focus on new greenfields discoveries, the industry will be challenged to meet even modest global demand forecasts, especially for copper.
Gold budget has shrunk sharply
Gold has followed up 2018's largest commodity increase of US$756.6 million, or 18%, with a US$559 million, or 12%, decrease in 2019 to US$4.29 billion
Part of the reason for this decline is the gold price, which underperformed in 2018 and at the start of 2019, with a low of US$1,160/oz in August 2018. While prices have rebounded strongly through 2019 and into 2020, the increase came much too late to aid 2019 budgets.
黄金价格下跌的第二个原因是2018年末和2019年初的并购活动，最显著的是巴里克（Barrick Randgold）和纽蒙特（Newmont Goldcorp）的交易。标普全球的数据表明，从历史上看，两家公司合并之后的勘查预算将低于合并前两家公司的预算之和。预算减少的主要原因是合并后的合理化措施，包括在撤资前减少对非核心资产的供资。仅这两起并购案就减去了2019年约1.03亿美元的潜在黄金勘查支出。
The second cause of gold's decrease is the merger and acquisition activity in late 2018 and early 2019, most notably the Barrick-Randgold and Newmont-Goldcorp transactions. Our data shows that historically when two companies combine, the exploration budget of the combined entity is less than the aggregate budget by the premerger pair of companies. The primary driver of this decrease is the rationalization process, which includes reducing funding of non-core assets prior to divestment. These two mergers alone removed about US$103 million of potential exploration spending for gold in 2019.
The aggregate base metal budget bucked the slowdown in global exploration in 2019 with an increase of US$191 million, or 6.3%, to US$3.23 billion. Copper allocations increased the most, up US$245.4 million6. While Chile continued to be the primary country for copper allocations and had a significant increase for minesite exploration, both the U.S. and Australia posted year-over-year gains in copper budgets. In the U.S., late-stage work has ramped up at some significant projects, while optimism for new discoveries in Australia has boosted the country's grassroots allocations.
The rebound in exploration pauses
The mining industry began 2018 on a positive note, but rising global economic and political headwinds halted the upward trajectory late in the year, with metals prices and equity market support falling off. Although market conditions improved by the end of 2019, geopolitical and macroeconomic concerns persisted through the year. This had a direct impact on exploration planning, with S&P Global Market Intelligence's survey of 3,300 companies in 2019 reporting a 4% decrease year over year in global aggregate nonferrous budgets to US$9.29 billion. After accounting for budgets we could not obtain, the estimated budget total of US$9.8 billion in 2019 is 3% lower than US$10.1 billion in 2018.
The number of active explorers increased 3% year over year to 1,708 in 2019, making it only the second year since 2012 with an annual increase. Many companies that had been dormant for the past several years reactivated in 2018, before prices began to pull back and financings became harder to secure. This led to the average and median exploration budgets decreasing to US$5.4 million and US$1.1 million respectively.
As recorded in our monthly Industry Monitor reports, junior and intermediate companies have been less able than the majors to raise funds for exploration since late 2018. Financings from November 2018 to February 2019 — the period when explorers typically tap the market to fund the new year's exploration effort — totaled US$957.1 million, compared with US$3.97 billion from November 2017 to February 2018. While financings recovered through the year, the US$8.61 billion raised during 2019 was well below both 2018 (US$9.2 billion) and 2017 (US$9.6 billion).
Capital offerings targeted primarily for exploration purposes continued to trend downward; the US$2.53 billion raised in 2019 was much lower than the US$2.91 billion and US$3.39 billion raised in 2018 and 2017 respectively. The difficulty in raising funds for exploration is reflected in the junior sector decreasing their budgets by 10% year over year. As the major companies mostly
maintained their allocations, the industry has become increasingly dependent on revenues to fund exploration.
Industry focusing on near- mine exploration
This trend accelerated in 2019, with planned spending at and near mines up 7% to US$3.57 billion. Minesite exploration accounted for the largest share of global allocations at 38.5%, the first time on record that minesite allocations have exceeded.
Both late-stage and grassroots spending, which were down 14% and 1% respectively year over year.
This shift away from early-stage exploration is already impacting the number of new deposits reporting resources. There has been an average of only 54 initial resources per year from 2015 to 2019, compared with 94 per year from 2010 to 2014. The size of the initial resources is also on a downward trend; the 176 gold initial resources reported since 2015 have an average endowment of 559,037 ounces, whereas the 271 resources reported from 2010 to 2014 average 835,000 ounces.
The industry's underinvestment in generative and discovery-oriented exploration is even more obvious when looking at major discoveries of copper (minimum 500,000 tonnes of contained copper) and gold (minimum 2 million ounces of contained gold). For both commodities, discovery rates have fallen dramatically over the past decade.
This lack of new quality deposits will not have an immediate impact on the industry. This is a longer-term concern, in the 10-15 year time frame, when deposits discovered over the past decade would need to be entering production to mitigate declines at existing mines.
Allocations rise in just 3 of 7 regions
With the slowdown in global exploration, only three of the seven CES regions had higher allocations in 2019, compared with six regional increases in 2018. Budgets for Australian projects increased the most, by almost US$200 million or 15%, followed by the United States with an increase of US$93 million or 11%. The Pacific/Southeast Asia region — the only region with a lower budget year over year in 2018 — saw a modest increase in 2019, up US$15.8 million or 5%.
Latin America remained the world's top region for exploration despite a budget decline of more than 4% and a second consecutive decline in global budget share, to 28% from a peak of almost 30% in 2017.
Six countries accounted for virtually all of the region's budget. Chile, with one-quarter of the region's total, combined with Peru, Mexico, Brazil, Argentina and Ecuador to account for nearly 90% of the Latin American total. Most of the decrease was due to a 14% drop in the region's gold budgets, largely resulting from lower allocations by major and intermediate companies. Copper allocations were up by 11%, with increases by all company types.
Australia jumped from fourth place in 2018 to second place in 2019, a position it last held in the late 1990s and early 2000s. Budgets for copper and gold were up, with the majors ramping up their programs in the region. Western Australia remained the top destination at 63% of region's total, with a 15% dollar increase over 2018.
The Rest of World region, which comprises Europe and mainland Asia, experienced the largest decline year over year, due to a US$139 million drop in gold allocations. Substantial reductions in budgets for copper, platinum group metals, or PGM, diamonds and other targets also contributed to the decline. Russia and China remained the top countries for exploration, accounting for a combined 56% of the total budget.
Canada slid one spot to the fourth position in regional ranking, with a budget decrease of 9% or US$134 million year over year in 2019. Juniors contributed the most to the decline, with a budget cut of US$95 m
illion, or 12%, year over year, while majors were down US$22 million, or 4%. By commodity, the plunge was driven primarily by the nearly US$200 million, or 21%, decrease in gold exploration, along with an aggregate US$40 million decline for PGM and zinc-lead.
Africa was fifth globally for a second consecutive year, after ranking second as recently as 2012. The region's 12% budget decline in 2019 was mostly due to a nearly US$150 million drop in allocations for gold and copper. Junior explorers cut their budgets the most year over year, by 25% for gold and 57% for copper. Despite a 35% drop in planned spending, Democratic Republic of Congo was the top African country for exploration, a position it has held since 2008.
Since the recovery of global exploration budgets in 2017, the United States has outperformed most of its regional peers, aided by the current government's easing of certain regulatory requirements for the exploration and development of federal mineral resources. In 2019, U.S. allocations rose by 11%, or US$93 million, compared with a 4% decline in the overall global budget. The increase was fueled mostly by an 80% surge in copper allocations and a 44% increase in budgets for other commodities like silver. U.S. gold allocations fell by 22% year over year and were almost equal with copper at around US$370 million. Despite a 6% decline in planned spending, Nevada remained first among the U.S. states.
After being the only region with a lower budget in 2018, Pacific/Southeast Asia's allocations increased by 5%, or US$15.8 million, year over year in 2019. Copper was the principal driver with a 12% increase, while gold was up almost 5%.
Drilling activity stays robust
Having contributed to the fall in 2019 global exploration budgets, the difficult financing conditions of late 2018 and early 2019 had a definite impact on the amount of drilling conducted in 2019. Explorers reported a total of 38,958 drillholes at 1,093 projects in 2019, down 21% and 13% respectively from the 49,061 drillholes at 1,262 projects in 2018. The late-2018 to early-2019 financing struggles had their greatest impact on drilling activity in the first half of 2019, when there were 18,265 holes reported compared with 20,723 holes in the second half — a 13% increase. While financing activity has since improved — an optimistic sign for 2020 — the benefits of the increased funding have not yet manifested in drill results.
Gold continued to be the top target in 2019, increasing its share of global drillholes to 63% from 58% in 2018. This is the highest level since 2016, when gold prices were pushed up by the U.K.'s Brexit vote and the U.S. election. Drilling activity for gold fell 9% year over year in terms of the number of projects, to 641 projects from 707 in 2018. The drop was even more pronounced in the total number of holes reported, which fell by 6,730 year over year.
While some of the cutback in gold drilling was due to fundraising pressures, it also reflected a shift in explorers' focus from advanced, late-stage projects — which require more drilling to delineate and define a deposit — to more grassroots prospects, which require fewer holes to identify a target. The number of grassroots projects reporting drilling for gold increased year over year in 2019, to 299 from 290, the highest level of grassroots gold drilling since 2012.
Declines in reported drill results for base/ other metals — which combines the industrial base metals with silver and platinum group metals, or PGM — were more uniform than for gold, with total drillholes declining 19% year over year and the number of projects falling by 15%. Base metals prices underperformed in 2019, hampered by the U.S.-China trade war.
In terms of drilling, zinc-lead and nickel were the most affected, with the numbers of projects falling by 19% and 32% respectively. Copper, with a comparatively more stable price in 2019, declined only 6% in the number of projects and actually had a 9% increase in the number of holes reported. while gold declined a more modest 9%.
In addition to the increase in early-stage drilling for gold, grassroots drilling for copper jumped notably with a 21% increase in the number of projects reporting. Those with significant results increased even further, up by 30% year over year. Significant results from projects conducting early-stage drilling for gold slipped by 4%. The numbers of late-stage and minesite projects undergoing drilling fell across nearly all commodities in 2019.
Drilling activity fell across most jurisdictions. Australia was home to the most projects reporting in 2019, as it was in 2018, and its lead widened over second-place Canada, with 314 projects reporting compared with 298 in Canada. Projects reporting in the two countries declined by 7% and 11% respectively year over year. Australia continued to lead by a wide margin in total number of holes drilled, although the total declined more year over year than it did in Canada, falling by 19% compared with 15% for Canada. Further highlighting an industry shift to familiar, stable home jurisdictions, drilling activity in Latin America, Africa and the Pacific (not including Australia) fell by 24%, 17% and 8% respectively in number of projects reporting.