Some people say that the most certain thing about the future development of the mining industry is the many uncertainties it faces. Nevertheless, from the perspective of exploration investment, some new features and new changes have become more obvious in the adjustment and reshaping, and these may be the new kinetic energy that the global mining development continues to accumulate, and even a certain breakthrough point for future development.

 

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The survey has warmed up.

 

With the improvement of market conditions in 2016, the global mining exploration budget gradually recovered in 2017, further increased in 2018, and the recovery broke at the end of 2018. From November 2018 to February 2019, commodity prices fell for most mining companies and corporate financing fell sharply, leading to lower levels of surface activity in early 2019.

Changes of National Geological Exploration Investment

The 2019 global survey budget data released by S & P Global Markets Financial Intelligence's "Corporate Survey Strategy" series of reports show that the survey industry has fallen back this year after it began to recover in late 2016. The 2019 global non-ferrous exploration budget fell 3% year-on-year to $10.1 billion from $9.8 billion in 2018. The data includes a combined budget of $9.29 billion, plus businesses spending less than $100000, and combined budget estimates for private companies that do not disclose data.

Mark Ferguson, senior analyst at S & P Global Financial Intelligence in the United States, analyzed that the exploration budget mainly depends on the demand for mineral products and is affected by financing and mergers and acquisitions. In 2019, mineral developers and operators were under a lot of pressure, and many negative and uncertain factors affected the market, causing prices to continue to fall. At the same time, from November 2018 to February this year, corporate financing fell sharply.

However, encouraging positive signs are also emerging. For example, financing activities have picked up, the number of active companies is increasing, copper mine budgets have increased year-on-year, and so on.

Related data show that the number of companies actively engaged in exploration increased by 3% to 1708 from 1651 in 2018. Companies that were "dormant" when the situation worsened became active again. The exploration budget for copper increased from $0.245 billion to $2.32 billion.

The previous S & P Global Market (S & P Global Market Intelligence) released the "World Mineral Exploration Trends 2018" report showed that the world's mineral exploration investment in 2018 was $10.1 billion billion, an increase of 19% over the previous year. Although exploration investment was less than half of the historical record of $21 billion set in 2012, drilling activity exceeded 2012, with the number of boreholes increasing by 14% year-on-year. Grassroots exploration as a percentage of the overall investment budget hit a record low, down 26% from 2017. Although large mining companies still invest more in early-stage exploration projects than junior exploration companies, they account for only 0.4 per cent of their revenues, down from a record low of 2 per cent in 1997.

The "China Mineral Resources Report 2019" issued by the Ministry of Natural Resources shows that my country's geological exploration investment has also continued to pick up. In 2018, the national geological exploration investment was 81.03 billion billion yuan, an increase of 3.5 percent over the previous year, and continued to rise after the first rebound in 2017. Among them, the investment in geological exploration of oil and gas minerals was 63.658 billion billion yuan, up 8.9 percent, while the investment in geological exploration of non-oil and gas minerals was 17.372 billion billion yuan, down 12.4 percent. New breakthroughs have been made in shale gas and natural gas hydrate exploration. Oil, natural gas, manganese, cobalt, lead, zinc, gold, lithium, graphite and other strategic mineral prospecting results are more significant.

"This year's infrastructure and exploration and mining activities have gradually stabilized, which is conducive to the realization of a very good exploration and mining trend." Mark Ferguson has said that despite the recovery in financing, the future of the exploration budget is still uncertain, and the exploration budget is expected to be relatively flat in 2020.

 

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Differentiation features highlighted

 

While the overall investment in global mineral exploration has warmed up, the differentiation characteristics have gradually emerged. In recent years, global solid mineral exploration investment has bottomed out, but China's investment has continued to decline; China's oil and gas exploration investment has rebounded, and solid mineral exploration investment has continued to decline.

According to the "Global Mining Development Report 2019" released by the International Mining Research Center of the China Geological Survey and China Mining News, global mineral exploration investment continued to rebound in 2018, with oil and gas exploration investment of US $781.4 billion billion, a year-on-year increase of 5%. Investment in solid mineral exploration was US $9.62 billion billion, an increase of 19 percent over the same period last year, an increase over the same period in 2017. China's investment in solid mineral exploration continued to decline, while investment in oil and gas exploration rebounded. In 2018, China's investment in solid mineral exploration was US $1.36 billion billion, a decrease of 23 percent over the same period last year, and investment in oil and gas exploration was US $9.36 billion billion, an increase of 8.9 percent over the same period last year.

Global solid mineral exploration investment is mainly concentrated in gold, copper and zinc and other minerals, these minerals in 2018 exploration investment accounted for 50%, 22%, 7%. The "China Mineral Resources Reporting 2019" shows that in 2018, non-oil and gas minerals were dominated by gold, coal, lead-zinc, and copper mines, accounting for 27.1 of the country's non-oil and gas mineral exploration investment. Compared with 2017, the input of nickel ore, silver ore, potash and manganese ore increased by 75%, 41.1, 19.2 and 6.4 respectively, while the input of tin, bauxite, tungsten, copper, molybdenum, iron and other minerals decreased significantly.

At the same time, strategic emerging minerals have received special attention, and their exploration investment has also seen a significant increase. "Lithium and cobalt mines are of concern. The budget for lithium in 2019 is increasing and there is a rapid increase compared to the previous year. There has been a lot of change in 2019, and it has been found that many companies are willing to carry out cobalt mining. The price of cobalt in 2019 is increasing, and unless there are some other changes, the growth rate is continuous upward." Mark Ferguson said.

Data show that in the past five years, lithium exploration investment has increased by 50 times, and cobalt exploration investment has increased by 5 times.

Influenced by the policy of improving the supply capacity of key domestic minerals, the exploration investment in the United States has increased significantly. According to S & P statistics, U.S. mineral investment in 2018 was 0.852 billion billion U.S. dollars, the highest level in five years, an increase of 34.2 percent over 2017. Drilling activity in the United States tended to be active in 2018, with the first quarter the highest in recent years. There has also been some progress in mineral exploration in the United States, with the discovery of the country's largest vanadium deposit in Nevada and the discovery of Fourmile gold in the state.

From the perspective of exploration area, Australia, North and South America and other regions are further focused by large mining companies and become areas favored by capital.

"With the support of exploration incentive policies, exploration investment in countries such as Australia continues to grow. With the growth of exploration investment, Australia has become a global exploration hotspot in recent years, especially in Western Australia, South Australia and Victoria." According to Yan Weidong, director of the Mineral Resources Research Office of the Information Center of the Ministry of Natural Resources, Australia's exploration results are gratifying. Rio Tinto's (Winu) copper and gold mine in Western Australia, BHP Billiton's (Oak dam) copper mine in South Australia, Xinfeng Mining's (Havieron) copper mine in Western Australia, Stavelli Mining's TG copper mine in Victoria, RNC's (Beta Hunte) gold mine in Western Australia are all rare major exploration achievements in recent years.

According to the Australian Federal Bureau of Statistics (ABS), investment in mineral exploration in 2018 was 2.184 billion Australian dollars, up 24 per cent from 2017, and the drilling footage was 9.833 million meters, up 17.6 per cent. In the first half of 2019, its exploration investment was US $1.169 billion, an increase of 16.1 per cent over the same period last year, and the drilling footage was 4.888 million meters, an increase of 8 per cent. Among them, the investment in new deposit exploration and drilling footage were 0.451 billion US dollars and 1.683 million meters respectively, up 31.3 and 5% respectively.

Whether in the mineral species or in the exploration area, the number of global mineral exploration inputs has shown obvious differentiation characteristics, and further revealed. This is related to the adjustment and change of mining policies in various countries, and is also affected by the mineral market and financing activities.

 

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More rational investment

 

On the whole, global mineral exploration investment is influenced by investment and financing activities and is highly consistent with the price trend of mineral products. In 2012, since the global mineral exploration entered the trough period from the peak, it has been undergoing adjustment and reconstruction in the bottoming up.

According to the Global Mining Development Report 2019, in recent years, mineral exploration as a whole has shown a trend of differentiation. The proportion of exploration investment of large mining companies increased, the proportion of small and medium-sized exploration companies decreased, grass-roots exploration investment decreased, detailed investigation and exploration investment continued to grow, gold, copper and other anti-risk minerals and lithium, cobalt and other strategic emerging minerals were focused, iron, manganese, aluminum and other traditional bulk mineral market attention decreased.

In fact, the changes in exploration minerals, exploration areas, exploration subjects, and exploration stages all reflect the face of many uncertainties, and mining exploration investment budgets and activities are also tending to be cautious and rational.

The shock adjustment of the mineral product market and the increasingly severe resource situation faced by global mineral exploration have deepened the caution and rationality of mining exploration behavior. In the past 10 years, the grade of newly discovered ores in the global exploration of gold, copper, lead, zinc, lithium, nickel and other minerals has shown a downward trend, and the difficulty of prospecting for rich ores that are easy to mine and easy to process has gradually increased.

Big waves scour the sand, and the survival of the fittest. In the past 10 years, the main body of the global mineral exploration market has transitioned from primary exploration companies to large exploration companies, and the exploration investment of large mining companies has exceeded that of primary exploration companies, becoming the main force of mineral exploration.

According to relevant data from the Global Mining Development Report 2019, large exploration companies invested US $4.97 billion billion in 2018, accounting for half of the world; primary exploration companies invested US $3.09 billion billion, accounting for 32%.

At the same time, large mining companies have become the main force in the exploration market, and the investment in grass-roots exploration is lower than that in the later mature stage. Over the years, the proportion of exploration investment in mine exploration and detailed investigation has increased, and the proportion of grass-roots exploration has continued to decline.

According to data from S & P Global Market Financial Intelligence, of the investment in the global solid mineral exploration phase in 2018, grassroots exploration was $2.51 billion, exploration and detailed investigation were $3.35 billion and $3.77 billion, respectively. In 2018, global grass-roots exploration investment hit a record low, and the proportion of late-stage exploration continued to increase.

This shows that with the slowdown of global economic growth, exploration companies are constantly optimizing capital allocation and are committed to investing limited funds in more mature projects rather than early high-risk projects, thus consciously avoiding various risks in investment.

A change worthy of attention is that in the past five years, global exploration hotspots have gradually shifted to countries and regions with high exploration and low risk. Mining exploration investment in the Americas and Australia is heating up and becoming a hot spot for capital; exploration investment in Africa is cooling, and policy contraction in Southeast Asia has affected exploration investment.

S & P statistics show that exploration investment in Congo (DRC), Argentina, Russia, Canada, Mexico, Peru, South Africa, and Brazil increased significantly in 2018, but exploration investment in Indonesia, India and Chile declined.

Among OPEC countries, Ecuador is the country with the fastest progress in mineral exploration in recent years. At present, the ore resources of Cascaville (Cascabel), the country's largest copper and gold mine, have risen to 2.9 billion tons, of which the proven and presumed resources are 2.05 billion tons, the copper grade is 0.41, and the gold grade is 0.29g/ton. It is estimated that the resources are 0.9 billion tons, the copper grade is 0.27, and the gold grade is 0.13g/ton. In addition to Cascaville, Ecuador has found a number of other projects with great potential.

"At present, developed countries in the United States and Europe are gradually regaining their mining industry, and OPEC countries have also discovered the potential of the mining industry, while developing countries have tightened relevant policies due to the interweaving of mining industry and ecological environment." Yan Weidong said. These changes are being reflected in various fields, including exploration, and thus affect the mining market and the development of the entire mining industry.

(This article was published in the first edition of China Mining News on December 9, 2019)