Responding to rising metals prices and more stable markets, most mining companies increased exploration budgets in 2010. The result was a 45% increase in estimated worldwide nonferrous metals exploration spending over 2009. Metals Economics Group’s (MEG) 21st edition of Corporate Exploration Strategies (CES) reports a 2010 exploration budget total of $11.2 billion. The industry restored almost two-thirds of the $5.5 billion that was cut from exploration in 2009 in response to the global financial crisis.
The speed and the strength of the 2010 rebound were a welcome surprise to many, given the severity of the downturn and widespread forecasts of a deep and protracted recession.
Regionally, Latin America (led by Mexico, Peru, Chile, Brazil, and Argentina) was the top exploration destination in 2010-a position it has held for the better part of two decades-while Canada was the top country overall. Gold was the leading target, attracting more than half the global exploration budget total, with copper a distant second.
When uranium allocations are added to the $11.2 billion nonferrous total, 2010 planned exploration spending rises to more than $12.1 billion, a 44% increase from the 2009 total including uranium.
MEG’s 2010 exploration estimate is based on information collected from more than 3,200 mining and exploration companies worldwide, of which almost 2,100 had exploration budgets reported in the CES study. These companies (each budgeting at least $100,000) together budgeted $10.68 billion for nonferrous exploration, which MEG estimates covers about 95% of worldwide commercially oriented nonferrous exploration budgets. Adding MEG’s estimates of budgets that it could not obtain, the 2010 worldwide exploration budget total reached more than $11.2 billion.
Recent editions of the CES study also include uranium exploration budgets. The 2010 edition covers uranium budgets totalling almost $830 million. Including uranium, the number of companies covered by the study increased to more than 2,200, and the aggregate exploration budget (including the $10.68 billion nonferrous total above) increased to $11.5 billion. Including estimates for budgets MEG could not obtain, worldwide nonferrous planned exploration expenditures, including uranium allocations, totaled more than $12.1 billion in 2010.
Riding the wave of rising metals prices, worldwide nonferrous exploration allocations increased for six consecutive years to an all-time high of $13.2 billion in 2008 (excluding uranium). The boom years came to an abrupt halt in September 2008, however, as the world fell into the worst economic and financial downturn in decades.
Widespread forecasts of a deep and protracted global recession painted a grim outlook for near-term global commodities demand, pushing most metals prices into steep decline and forcing companies to slash their 2009 exploration plans-some by choice and others to survive. The resulting 42% drop (about $5.5 billion) in worldwide nonferrous exploration budgets from the 2008 high was the largest year-on-year decline (in both dollar and percentage terms) since MEG began the CES series in 1989.
After bottoming in early 2009, the industry recovered much more quickly than most would have dared predict. Although the recovery remained fragile, the global economy improved markedly over the course of 2009 and into 2010. Metals prices improved steadily since bottoming in early 2009, and were again well above their long-term trends through most of 2010. Responding to rising prices and more stable market conditions, most companies increased their exploration budgets in 2010, resulting in a 45% increase ($3.5 billion) in MEG’s estimated exploration budget total for 2010, restoring almost two-thirds of 2009’s estimated $5.5 billion cut.