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9
Top 10 business risks facing mining and metals 2017–2018
Exploration was the first cost to
be cut as prices declined but
hasn’t been the first to be
reinstated. It is, however,
essential for future sector
growth.
was spent for 11 discoveries. In 2015, just
under US$2b was spent for a single
discovery.
10
To overcome some of these challenges, in
addition to increasing exploration spending,
mining and metals companies are:
• Forming strategic partnerships with junior
miners to expand their reserve base, e.g.,
Newmont has invested in Canadian and
Australian properties owned by junior
explorers to strengthen its long-term
growth pipeline
11
•
Entering joint ventures, e.g., Goldcorp
and Barrick have partnered to develop
gold mines in Chile
12
• Acquiring existing projects or mines
• Improving technology to achieve higher
exploration success rates
Over the last five years, capex spent on
resource replacement has declined by 66%
from US$20.5b to US$6.8b due to lower
commodity prices and returns.
9
Now that
growth is back on the agenda, mining and
metals companies are allocating more
sustaining or growth capital to get the most
out of current projects. However, we have
yet to see a significant increase in
exploration capex. And while recent data
shows that global drilling has increased,
budgets are still off levels at the peak of the
supercycle and aren’t evenly spread across
regions or minerals.
Exploration has also become more
expensive as reserves are harder to
access, more remote or on environmentally
sensitive land. In the gold sector in
1995, some US$1.4b was spent for 19
discoveries, and in 2005, around US$1.6b
9 “World exploration trends: A Special Report for the PDAC International Convention,”
S&P Global Market Intelligence
, March 2017.
10 “Strategies for gold reserves replacement,”
SNL Metals and Mining
, July 2016.
11
“Junior thinks big,”
MiningNews.net
, 18 September 2018, “Newmont Secures Rights to Explore and Develop Prospective New Yukon
Gold District,” Newmont press release, 6 March 2017.
12 “Goldcorp spends nearly $1 billion to get into Chilean joint venture with Barrick Gold,”
Financial Post
, 28 March 2017.
Resource depletion is a concern — we’ve stopped
spending on exploration. This is equivalent to
technology companies not spending on innovation.
Key thought
Resource
replacement
(New)
08
10
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Top 10 business risks facing mining and metals 2017–2018
10
Miningand minerals-processing
operations require a large
quantity of electricity. Remote
area mining operations have
uniquechallengesin developing,
maintaining and operating stand-
alone power systems. Operations
fortunate enoughto have major
grid suppliesare often significant
customers in the electricity
system such that their
