Presentation to the PDAC, Toronto, March 2017
This is the fourth time that I have presented at PDAC. The first was back in 2010 when I gave a talk on “Global Discovery Trends 1950-2009: What, Where and Who found them” . Thought it would be good to update (and extend) this presentation to cover the current situation.
The key observations are:
- Global exploration expenditures (for bulks and non-ferrous) reached an all-time high in 2012 (of US$33 billion). In the 4 years since then it has dropped by 69% to $10.2 billion.
- Gold continues to be the main target (39%) followed by base metals (29%) and bulk minerals (14%).
- The country with the most exploration is China (26%) followed by Canada (11%) and Australia (10%)
- Historically, ~70-80 Moderate-sized (or larger) deposits were found each year in the World. This peaked at 149 discoveries in 2007 and has fallen dramatically since then. However, we need to remember that it does take time for discoveries to be reported and fully-drilled out
- Most of the discoveries were of small size and low value. Tier-1 deposits (ie World Class) deposits are rare … and typically only 20-30 found each decade. Over the last decade only 12 were found. Four of these were in Canada. None were found in Australia
- Over the last 20 years the role and importance of the junior sector has risen. In the Western World, Juniors now account for ~70% of the total number of deposits found and 50% of the value created. Major & Moderate Producers found 18% of the number and 35% of the value.
- Over the last decade, due to a massive increase in spend and only modest increase in the number of deposits found, industry performance declined
- The average cost per discovery went up 3-fold ($86 to $238m in constant 2016 Dollars)
- Due to the lack of Tier-1 discoveries the industry switched from Wealth Creation to Wealth destruction … with the Value/Cost Ratio declining to 0.47. This should improve over time as more discoveries are reported
- China massively increased its domestic spend but, to date, has little to show for it resulting in a V/C ratio of 0.33
- Canada was much better – with a V/C ratio of 0.62. Australia was 0.54, and was let down by the lack of Tier-1 discoveries.
- Latin America performed poorly with a V/C ratio of just 0.33
- Most of the commodities generated a similar V/C ratio. The outliers were Diamonds (0.19) and “Other” (0.75) … with the latter benefiting from significant discoveries of graphite, potash and lithium
- There are many factors associated with the recent decline in discovery performance. Some are structural and others are cyclical. These include the:
- Progressive move to targets under-cover
- Increased emphasis on brownfields exploration and feasibility-studies (which don’t deliver big discoveries) at the expense of greenfield exploration
- Decline in drilling activity (if we don’t drill, we won’t find)
- Input costs for drilling and geologists increased in the boom years (and have come back since)
- And don’t forget the ongoing issue of the inherent delay in reporting discoveries !
- The long term outlook for exploration is positive. We are now at the bottom of the business cycle and subject to an expected moderate improvement in commodity prices, global exploration expenditures are set to rise by 60% over the next 4 years
So in conclusion, it’s now time to get back out in the field and start drilling!