The Paper assesses the trends facing Australian mineral explorers and discusses the sustainability of the industry in light of reduced discovery rates and a reducing share of global exploration expenditure. It raises the serious question of 'where are Australia's mines of tomorrow coming from?'
Key observations are:
- Although the level of exploration spending has increased four-fold in the last decade, much of this growth was associated with bulk minerals (ie iron ore, coal and bauxite). In 2011, exploration for bulk minerals accounted for 52% of total spend. Stripping these out results in a much more subdued picture for the rest of the industry.
- There is a risk that the future level of exploration may be adversely affected by the incoming Mineral Resource Rent Tax and the recent collapse in iron ore prices.
- The overall number of metres drilled hasn't kept pace with the rise in exploration expenditure – suggesting that the industry is facing major cost issues. The mantra is "if you don't drill, you won't discover".
- Of more concern is the trend away from greenfield into brownfield exploration. While the latter is perceived to be lower risk, it is less likely to deliver the giant discoveries the industry needs to sustain itself. The Kambalda nickel camp is used as a case study on this point.
- An analysis of the 41 large non-ferrous mines in Australia (which account for over 80% of the country's Au, Cu, Zn and Pb production) found that, based on current reserve and resources, about half of these mines would be exhausted between 7 and 18 years.
- The challenge for industry is the fact that, on average, it takes 7 years to convert a discovery into an operating mine. Consequently, to be sustainable in the longer term, the mining industry needs to continuously build up a strong pipeline of projects at or close to the development stage. This, in turn, is only possible on the basis of an active and successful minerals exploration sector.