Recent Exploration Trends – and the special challenges facing the Northern Territory

Presentation to the Northern Territory Branch of the Australasian Institute of Mining & Metallurgy (AusIMM), Darwin, May 2012

The presentation reviews key trends in Australia’s and World exploration over the period 1975-2011. It also discusses the local exploration scene in the Northern Territory. Key observations are:

Expenditures on mineral exploration are currently at an all-time high. In 2011, in the Western World, the industry spent around US$18.2 billion exploring for minerals (figure includes bulk minerals). Even after adjusting for inflation, this is 6x higher than the $2.5 billion spent in 2002.

The current six hot-spots for exploration around the world are Alaska/Yukon, Northern Ontario, Latin America, West Africa, Central Africa and China.

Over the period 1975-2011, Australia’s share of Western World spend averaged 18% (or 15% of you exclude Bulk Minerals) Over the period 1975-2011, Australia accounted for 20% of the non-bulk mineral discoveries – which is affair effort In the last decade, the average cost of discovery in the Western World has doubled to ~US$180m per Moderate-sized deposit found (>100koz, >100kt Cu etc). Looking forward it now costs around US$30/oz to find gold, US$4/lb for U3O8 and 2.5 c/lb to find copper. The overall amount of gold and copper being found is sufficient to sustain current production rates – but only if global exploration expenditures remain near current high rates.

Although its overall success rate has been good, over the last decade, Australia has not been very good at finding giant deposits (ie >6 Moz Au, >5 Mt Cu etc ) – this is a problem.

The decline in discovery performance is due to the fact that the level of drilling has not risen by the same rate as overall exploration expenditures – suggesting that the industry is facing a shortage of quality targets and severe cost inflation for labour and services. The challenge is that if you don’t drill, you don’t discover.

A related factor in Australia is the fact that over 2/3rds of all expenditures are now directed to brownfields rather than greenfields exploration – a reverse of the situation two decades ago. A key point is that brownfields exploration is unlikely to deliver new giant deposits.

The northern Territory’s share of Australia’s exploration expenditures has been slowly declining over the last 20 years – though much of this may be due to major increase in expenditures on iron ore and coal exploration in Western Australia and Queensland respectively.

Over the last decade Northern Territory accounted for 7% of Australia’s exploration spend and 8% of its (non-bulk) mineral discoveries – which is a fair effort.

According to the 2012 Fraser Institute Mining Survey, in terms of Mineral Potential, the Northern Territory is ranked as 49th best out of 93 in the world. In terms of the its Policy Potential (or its “Ability to do Business”) it is ranked at 11th best in the world – and (surprisingly!) is currently one of the best jurisdictions in Australia.

From a local industry’s perspective there are some challenges in exploring and operating in the NT. Major concerns have centred on the lack of consultation by Government over controversial decisions on various tenement applications and environmental permits. Other issues are high royalty rates. The key challenge (and the opportunity) is to find more effective ways of exploring under-cover in the NT.

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