Metals Economics Group’s (MEG) 22nd edition of Corporate Exploration Strategies (CES) concludes the industry’s aggregate budget for nonferrous metals exploration surged to $18.2 billion in 2011. Despite periods of weakness and volatility, metals prices-the primary driver of exploration spending- have improved significantly since bottoming in early 2009, and have remained well above their long-term trends through 2010-11. Almost all companies have responded by increasing their exploration budgets over the past two years. As a result, the industry’s aggregate exploration total jumped 44% in 2010 and a further 50% in 2011, more than doubling from 2009’s recent low of $8.4 billion to the new all-time high of $18.2 billion in 2011.The PDAC has partnered with MEG in making this special report on global exploration and industry trends available to its members and Convention 2012 delegates. Ross Gallinger, Executive Director, PDAC, explains “The PDAC makes use of Metals Economics Group’s services to better understand global exploration trends, thereby helping us to support our members through the development of programs and policy recommendations. Metals Economics Group is acknowledged as the leader in providing comprehensive information, expertise, and analysis to the mining industry, and is the premier source for exploration statistics worldwide.”

Looking forward, MEG predicts that “despite concerns about the global economy and projections of lacklustre growth for most countries, China and other resource-hungry emerging and developing economies are still expected to lead global GDP growth and demand for metals over the next few years. On the supply side, the industry still faces many of the limitations that existed prior to the 2008 economic downturn that effectively set back the clock on many developments. While periods of weakness and volatility will likely continue in the near term, most metals prices are expected to remain above their long-term trends and comfortably above the nominal cost of production through 2012.

“Most major and intermediate producers remain committed to exploration to replace mined reserves and strengthen and grow their pipelines, particularly while metals prices stay relatively strong. We expect most producers – many of which have much healthier balance sheets than they did a few years ago – to continue to invest in organic growth, resulting in a moderate increase in their aggregate exploration allocation in 2012.

“Exploration spending by risk capital-dependent junior companies may be a different story, however. As the pace of exploration financings weakened in late 2011 – traditionally the busiest time of year for junior exploration – related financings as companies cash-up ahead of the upcoming field season – many juniors have had trouble raising the funds needed to sustain or increase exploration spending in 2012. Although early indications are that some juniors plan to increase their exploration budgets in 2012, unless equity markets improve over the fi rst quarter, many will likely be forced to reduce exploration spending this year. We therefore expect a slight decline in spending by the juniors, offset by increased spending by the producers, resulting in a net increase of 5%-15% in exploration spending by the industry as a whole in 2012 – a relatively small change compared with the 40%-50% swings of the past few years.