Engineering & Mining Journal

MAY 2017

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EXPLORATION 30 E&MJ; • MAY 2017 www.e-mj.com A quick scan of the latest annual and year-end reports from some of the world's major mining companies confirms what many in the industry have been seeing at first hand for several years now. In con- junction with their sell-off of non-core and under-performing assets, companies have become increasingly cautious about their exploration spending as they look for ways to cut costs and streamline their operations. This is, of course, nothing new to anyone who has been involved in min- ing and exploration though a number of economic cycles. It is a sad but true fact that mining still seems to be locked into a self-perpetuating boom-and-bust men- tality, spending like there is no tomorrow when commodity prices are high, and then suffering the consequences in each succeeding downturn. The current cycle is, unfortunately, no exception. In a presentation to the PDAC in March, Richard Schodde, managing di- rector of the Australian firm, MinEx Con- sulting, put the situation into some per- spective. "Global exploration expenditure (for bulks and non-ferrous) reached an all-time high of $33 billion in 2012," he explained. "In the four years since then, it has dropped by 69% to $10.2 billion." His paper Recent Trends and Outlook for Global Exploration was, Schodde point- ed out, effectively an update on a previous PDAC presentation that looked at global discovery trends since 1950, focusing on the period since 2007. In terms of com- modities, his data show that: "gold contin- ues to be the main target (accounting for 39% of expenditure)," he said, "followed by base metals (29%) and bulk minerals (14%). The country spending most on ex- ploration is China (26%) followed by Can- ada (11%) and Australia (10%)." Schodde went on to describe how ex- ploration success has also slipped in re- cent years. "Historically, some 70 to 80 moderate-sized (or larger) deposits were found each year in the world. This peaked at 149 discoveries in 2007 and has fallen dramatically since then," he noted, while acknowledging that "we need to remem- ber that it does take time for discoveries to be reported and fully-drilled out. "Most of the discoveries were of small size and low value. Tier-1 (world-class) deposits are rare … and typically only 20-30 are found each decade," he went on. "Over the last decade, only 12 were found, four of which were in Canada. Over the last decade, due to a massive increase in spending and only a modest increase in the number of deposits found, the exploration industry's performance declined, Schodde stated, with the aver- age cost per discovery having risen three- fold from $86 million to $238 million in constant 2016 dollars. What is more con- cerning, he pointed out, is the fact that the industry has switched from wealth creation to wealth destruction because of the lack of Tier 1 discoveries. Putting this into figures, Schodde believes that the value/cost (V/C) ratio worldwide has declined to 0.47, although this average marks some significant re- gional differences. Thus while explora- tion expenditure in China has increased substantially, albeit with little to show for it, its V/C ratio is 0.33, similar to that of Latin America. By contrast, Australia remained on the positive side of the bal- ance at 0.54, while Canada did even bet- ter, with a V/C ratio of 0.62. "There are many factors associated with the recent decline in discovery per- formance," Schodde said. "Some are structural and others are cyclical. These include: • Increased emphasis on brownfield ex- ploration and feasibility studies at the expense of greenfield exploration; • The reduction in drilling activity; and Budgets Trimmed, with Closer Focus Has exploration spending bottomed out? Which companies are most optimistic? Will grassroots project spending pick up? E&MJ; looks for answers. By Simon Walker, European Editor Introduced at last year's MINExpo, Atlas Copco's Diamec Smart 8 is now the largest model in the Diamec range, and is capable of coring to depths of up to 2,000 m (6,500 ft), the company states.

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