Global Exploration Trends Set to Improve
CONFERENCE CALLER: CSA Global’s manager of exploration Marcus Willson proved to be the antithesis to the buoyant mood at the RIU Explorers Conference in Fremantle, By Jacinta Payne
Willson took his audience on a trip down memory lane of the recent industry downturn presenting delegates with some stark realities of current exploration trends.
The world of exploration has looked gloomy since the 2008 crash, especially since the 2012 resurgence.
“In the words of George Harrison, ‘it’s been a long cold lonely winter’ ever since peak exploration in 2012,” Willson opened with.
After the 2008 global financial crisis, the sector steadily recovered with metals prices and market capital increasing.
“In 2010, on the back of stimulus led investment we saw a short-term return to investment and exploration through to 2012,” he continued.
The audience was looking for some optimism from Willson’s presentation as he went on to explain that since 2012 there has been a steady decline in market capitalisation as commodity prices have fallen.
“Of course, exploration budgets in the industry are strongly constrained by the metal prices,” he said.
Global spending on exploration for 2016 sat around $7 billion, although this number has risen in recent years, it is still half the pre-GFC levels of spending that resulted in around $14 billion spent on exploration.
“Access to financings has huge impact on a company’s ability to carry out exploration, particularly in the junior and mid-tier sectors,” Willson explained.
“I suggest this is a shift out of risk into more advanced projects.”
Of the $7 billion invested in exploration activities in 2016, nearly half was spent on chasing gold.
Given that particular commodity has been credited with providing the base from which the recent upward movement in the resources sector, it’s no surprise to learn that number continues to increase.
“Between base metals and gold we account for nearly three quarters of the global exploration budget,” Willson explained.
Steel, uranium and coal projects are in decline, while demand for battery metals are starting to rise.
Discovery costs are rising, and rates of discovery are falling. What does this mean for the future?
“We must be smarter in our exploration efforts and integrate science and technology,” said Willson.
“It is clear that we need access to greater funding to ensure the future of the exploration business.”
Data from the ASX says between 2014 to 2016 there was an average of eight successful resource IPO’s funded for each year. One month into 2017 and that number is already six.
“Estimating forward perhaps 2017 will see an order of magnitude improvement in funding for exploration,” he said.
“Perhaps the sun really is coming out again, and long may it shine.”