Global Exploration Trends

Presentation to the China Mining 2012 Conference, Tianjin, November 2012

The presentation reviews key trends in World exploration over the period 1975-2011. Key observations are:

Exploration expenditures in the Western World have increased 6-fold in the last decade – up from US$3 billion in 2002 to over $21 billion in 2011. This is set to further increase to over $24 billion in 2012. Note all figures are in constant June 20912 dollars.

An increasing proportion of this expenditure is associated with bulk minerals (principally iron ore and coal). They now make up 21% of total, versus just 6% back in 2002.

Excluding bulk minerals, on average 40-60 significant mineral discoveries are made each year in the world. Around half of these are gold.

There seems to be a drop off in discovery rates in recent years. Though it must be cautioned that this might be an artefact of the inherent delays in reporting and drilling out a given discovery.

These discoveries are widely distributed around the world. Over the last 5 years (2007-2011), 28% of the discoveries were in Africa, 24% in Australia, 19% in North America and 17% in Latin America and 12% in other countries.

The current “hot spots” for exploration are Alaska/Yukon, Northern Ontario, the Cordilleran section of Latin America, West Africa, Central Africa, Western Australia and China.

It is significant to note that an increasing proportion of the discoveries were made by Junior Companies. Over the last 5 years they accounted for 71% of all discoveries, versus 14% by Major Companies, 7% by Moderate-sized Companies and 4% by State Owned Companies. To their defence, it should be noted that the Major Companies tend to focus their exploration efforts on finding World-Class deposits which, by definition, are rare. The Junior Sector accounts for most of the smaller (and more common) deposits.

Even after adjusting for expected growth in recent discoveries, the unit discovery cost for copper has doubled in the last decade and is projected to be around 2.5 c/lb Cu-equivalent (or 3.0 c/lb Cu excluding by-product credits) going forward. Similar increases in unit discovery costs are noted for other metals.

Of general concern is the industry’s ability to sustain itself. Recent trends for copper indicate that it is struggling to replace the tonnes it mines. Similar concerns are noted for other metals.

I believe that the industry can be sustainable. However it needs to be both more efficient and effective in how and where it explores. Exploration activity also needs to be maintained at a high level.

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