Mining exploration set for post-COVID boost

According to S&P’s World Exploration Trends 2021 report, Australia’s nonferrous metals exploration budget had a 12.5 per cent year-over-year decline to $US1.67 billion ($2.16 billion), however it placed as the second highest nonferrous exploration spender globally, behind Canada at $US2.87 billion.

Global nonferrous mineral exploration declined by 10 per cent in 2020 to $US8.7 billion year-over-year.

However, S&P expects exploration spending to ramp up off the back of the COVID-19 vaccine rollout and positive metal prices.

S&P has predicted that 20 per cent of budgets were expected to recover in 2021.

“If metals prices remain elevated over the next several months, it is likely that the exploration budget recovery in 2021 will also be strong, possibly in the 15 per cent-20 per cent range,” S&P stated.

Last year, 52 per cent of the world’s explorers targeted gold, 21 per cent targeted copper and 5 per cent targeted zinc and lead.

The report also found that the industry had retained was focus on low-risk exploration, rather than grassroots exploration.

“Observers and policymakers have raised red flags over negative impacts to future production from the lack of grassroots exploration, spurring some governments to boost domestic exploration through incentive programs,” S&P stated.

The start of 2021 has enjoyed stronger metals prices, with copper reaching $US7749 per tonne at the end of 2020, up from 26 per cent at the end of 2019.

By February 25, the London Metal Exchange price of copper reached $US9,614.50 per tonne, which was the highest result since August 2011.

“The industry optimism that existed in late 2019 was wiped out by the global pandemic, but the quicker-than-expected recovery for the mining industry bodes well for 2021,” S&P principal analyst Kevin Murphy said.

S&P also stated exploration budgets had decreased due to COVID-19 lockdowns, which had impacted exploration planning.

“Lockdowns hindered exploration efforts, and an acute decrease in most base metal prices in March (2020) saw producers lower budgets in anticipation of a slow price recovery,” S&P stated.

“While regional lockdowns will likely still occur, their impacts will be less as our knowledge of the virus and its transmission improve. This means that the mining industry’s risks from COVID-19, while not gone, have decreased considerably.”