After rising for six straight years to a 19-year record high of $13.2 billion in 2008, estimated planned nonferrous exploration spending for 2009 plummeted 42% to $7.7 billion. According to Metals Economics Group’s (MEG) 20th edition of Corporate Exploration Strategies (CES), the global economic crisis and declining prices for almost all mineral commodities took their toll on the industry. This year’s drop represents the largest year-on-year decline in global exploration budgets (in both dollar and percentage terms) since MEG began the CES study in 1989.

As aggregate groups, major, intermediate, and junior companies all made deep cuts to their exploration budgets in 2009. Not surprisingly, the bulk of the decline is attributable to the juniors, as their reliance on equity financings prompted most of them to cut exploration much more than the major and intermediate groups, whose deeper pockets at least gave them the option of continuing to fund exploration at higher levels. As a result, the majors now account for the largest share of this year’s exploration budget total after having been surpassed by the juniors’ planned spending in each of the past five years.

Despite the tougher times faced by the juniors, analysts’ projections at the onset of the market crash that “as much as 50% of junior explorers would not survive the next 12 months” have clearly not come true; the number of active junior explorers included in the 2009 study dropped just 6% from last year.

While attracting financing has not been easy for the majority of junior companies over the past year, the equity markets have not been as barren as some suggest, particularly as market sentiment has improved from earlier in the year. Over the first nine months of 2009, the junior explorers included in the CES have recorded more than 300 exploration-related equity financings on exchanges around the world (each raising a minimum of $2 million), totaling more than $4.7 billion.

Worldwide Nonferrous Exploration Total* (1,846 companies covered) – $7.32

Estimated Worldwide Nonferrous Exploration Total**  – $7.7

(Including uranium)

Worldwide Nonferrous Exploration Total* (1,998 companies covered) – $7.98

Estimated Worldwide Nonferrous Exploration Total** – $8.4

*MEG estimates that the companies covered by the CES account for about 95% of nonferrous exploration budgets.

**Includes the additional 5% of planned expenditures MEG could not obtain.

Although not all the money a junior raises in the name of exploration will actually be spent on exploration, the amount raised by the group in exploration-related equity financings suggests that most will be able to fund their plans for this year. Moreover, if recent metals price and financing trends persist through the remainder of the year and into early 2010, it could stop the fall in global exploration spending next year; however, the general uncertainty over the sustainability of the economic recovery, combined with fears of market volatility, may suppress any meaningful increase to overall exploration budgets in the coming year.

MEG’s 2009 estimate is based on planned nonferrous exploration spending by 1,846 companies (budgeting at least $100,000) totalling $7.32 billion. In addition, MEG began covering uranium budgets in 2007; this year’s CES includes 319 companies collectively reporting more than $664 million in 2009 uranium allocations, of which 152 are exploring solely for uranium. Including uranium budgets, the total number of companies surveyed increases to 1,998, with an aggregate exploration budget of more than $7.98 billion. Including estimates for all budgets that could not be obtained, MEG’s estimate of worldwide 2009 exploration budgets including uranium allocations totals more than $8.4 billion-also down 42% from 2008’s peak of $14.4 billion.

For more information on MEG’s Corporate Exploration Strategies study: www.metalseconomics.com