Keynote presentation given at the Mines & Money Conference, Melbourne, June 2023
This presentation discusses recent trends and outlook for the Australian exploration scene, with a special emphasis on the important contribution from the Junior Sector.
A similar analysis of the Canadian Junior Sector was done in July 2022.
The key findings of the current presentation are:
- In 2022 Australia spent A$4.1 billion on exploration, which is close to the record $4.6 billion (in constant 2022 Dollars) spent back in 2012.
- Over the last decade (2012-21) Junior Companies accounted for 45% of the total exploration spend.
- With regard to the number of discoveries made, the local industry is currently only finding 12-15 significant new deposits per year, down from 15-25 discoveries pa in previous decades.
Over the last decade 73% of these deposits were found by Junior Companies.
- The two main commodities of interest were gold and base metals. In recent times most of the discoveries were located in Western Australia.
- Since 1975 a total of 955 discoveries have been made in Australia. 106 (or 12%) of these were Tier 1 or 2. While modest in number, they accounted for 73% of the total value created by the industry.
- Over the last decade five Tier 1 deposits were discovered in Australia – Junior Companies found 3 of these; namely Mt Holland (Li in 2016), Hemi (Au in 2019) and Julimar (Ni-PGE in 2020). The Majors found two Tier 1 discoveries; Wodgina (Li in 2016) and Swan (Au, also in 2016).
- Over the last decade Junior Companies captured 61% of the value … demonstrating that they are doing much more of the “heavy-lifting” than the Major Companies.
- All up, over the last decade, US$23.4 billion was spent on mineral exploration in Australia, delivering US$28.3 billion of value. This equates to a Value/Cost ratio (or “Bang per Buck” of 1.21. The Junior companies performed much better than the Majors (1.69 versus 0.74). Part of this may be due to the latter focusing more on mine-site exploration … while this will extend the life of an existing operation, it rarely results in major new stand-alone discoveries.
- In terms of value creation, over the last decade Australia was one of the best jurisdictions in the World – much better than Global average of 0.68. By comparison Canada’s and Latin America’s “Bang-per-Buck” was only 0.79 and 0.43 respectively.
The presentation also touched on a couple of the current key challenges facing the industry. These were:
- The sustained rise in the cost of exploration. After adjusting for inflation, it now costs the average explorer ~US$200 million to make a significant discovery. This is 4x higher than that incurred two decades ago. This problem is not unique to Australia, with similar trends occurring elsewhere. Clearly, discovery is becoming progressively harder & riskier to do,
- Based on a detailed analysis of 25 years of ASX Quarterly Reports, local Junior Explorers are currently facing a “cash-drought”. Unless you have a “good” story to tell, companies are finding it very difficult to raise fresh capital from their shareholders. As cash reserves run down, the Juniors have started cutting back on their expenditures. This has particularly reduced the amount of fieldwork being done which, in turn, will adversely impact on the rate of discovery. MinEx forecasts that further reductions in expenditure will occur over the next 12 months.
In conclusion, given the need for the World to transition to a low-carbon future, metal demand is set to significantly rise over the next decade. To feed this demand it is imperative we find major new deposits. Clearly, we either need to spend more on exploration or be much better at discovery.