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Title
Schodde RC, "Gold exploration: Gloom or boom?", article for a special supplement on the Gold industry, published by the Mining Journal September 2013

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In a recent keynote address to the Geological Society of South Africa GeoForum 2013 Conference in Johannesburg, I gave a detailed assessment on the Long-term Outlook for the Global Exploration industry - Gloom or Boom? At the request of the Mining Journal, I have recast the assessment to focus in on the likely outlook for gold exploration.

In detail:

  • Over the last decade total expenditure on gold exploration rose (in constant 2012 US dollars) from US$1.2 billion to a peak of US$10.0 billion in 2012, and accounts for 34% of total spend on all mineral commodities.
  • It is estimated that the total number of - mainly junior - companies actively exploring for minerals has more than doubled over the last decade from 1500 to over 3500 at present.
  • There is a strong correlation between the gold price and exploration spend. Using this I developed a model to forecast the likely level of gold exploration by region.
  • Based on current pessimistic gold price forecasts, I estimate that the amount spent on gold exploration could drop by 25% to US$7.6 billion in 2013, before falling further to US$4.6 billion in constant 2012 dollars by 2020.
  • With regard to the recent trends in exploration success, MinEx has data on 234 primary gold discoveries (containing more than 0.1Moz each) made over the last decade, amounting to a total resource of 687 Moz.
  • MinEx identified 58 base metal and other discoveries over the period 2003-12 that contain a total of 150Moz of by-product gold.
  • Of particular importance to the long-term viability of the industry is the disturbing fact that it is becoming progressively more expensive to make discoveries.
  • Even after adjusting for the number of unreported discoveries & resource growth, a large gap has opened up in the last five years between the amount of money spent and the estimated number of discoveries made by industry.
  • It now costs twice as much to make a discovery as before. In other words, exploration productivity has halved.
  • In MinEx's opinion, the likely culprit is the dramatic and sustained increase in input costs such as drilling, labour, land access and administration all of which have doubled in real terms over the past decade.
  • The challenge, as always, is being efficient and effective in the way companies do their exploration. Some things never change.

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