Overview of Trends in Canadian Mineral Exploration 2008

   

Canadian Global Exploration Activity

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Introduction

This section provides an overview of Canadian mineral exploration activity⁸ abroad. It also highlights the domestic and foreign components of the larger-company exploration market in Canada. The information in this review was current as at January 2009.

Global Market for Mineral Exploration

The value of exploration programs expected to be undertaken worldwide in 2008 for precious metals, base metals, and diamonds (Table 12) reached US$12.6 billion, up by US$2.7 billion, or 27%, from the US$9.9 billion that companies had planned to spend in 2007.⁹ The value of these programs includes the budgets of the larger companies and those of the smaller companies. It also includes estimates for firms that do not disclose their exploration plans and for firms that were likely to spend less than US$100 000 in 2008. For the second year, the Metals Economics Group (MEG) has included uranium in its survey of company planned exploration budgets. However, uranium will not be included in this analysis in order to keep the numbers comparable to previous years.

The world’s larger companies are defined here as those companies that planned to spend at least US$3 million annually on mineral exploration in 2008; the world’s smaller companies are defined as those companies that planned to spend at least US$100 000, but less than US$3 million, on mineral exploration in 2008. This definition of larger and smaller companies should not be confused with the MEG definition of a junior and senior company where the division is based on revenue for the seniors and equity financing for juniors. In fact, the larger-company category has included increasing numbers of “junior” companies as the equity markets have provided significant junior equity financing in recent years.

The number of companies that reported budgets for mineral exploration of at least US$100 000 in 2008 decreased to 1908, down by 58 firms, or 3%, from 1966 the previous year. As a group these 1908 companies planned to spend US$12.601 billion in 122 countries, the same number of countries as in 2006 and 2007. A total of 1153 of these companies, or 65%, were based in Canada.

Compared with the previous year, the budgets of companies that planned to spend at least US$100 000 on mineral exploration in 2008 increased for about 70% of the countries in which they expected to operate. Aggregate year-over-year company budgets grew by US$527 million for Australia, by US$503 million for Canada, by US$200 million for Peru, by US$191 million for Mexico, by US$167 million for Chile, by US$145 million for the United States, by US$103 million for Indonesia, and by US$98 million for Brazil. As for the 36 countries where exploration budgets were expected to decrease from 2007 to 2008, the largest decrease was by US$26 million for Russia and the second largest decrease was by US$21 million for Guinea. Total lost budgets were a relatively small US$192 million.

World’s Larger Companies

Global trends in mineral exploration are generally based on data for the world’s larger companies. The focus of this chapter is on this group of companies.

During 2008, the world’s larger companies were expected to undertake exploration programs with a combined value of US$11.292 billion in 108 countries, 31 more countries than in 2007. The aggregate budgets of the world’s larger companies increased by 42%, up from US$7.945 billion the previous year.

In 2008, the number of companies based around the world that intended to spend at least US$3 million on mineral exploration leaped to 788 (Figure 11), a record high for the fourth year in a row. In 2007, 579 companies had planned to spend an equivalent amount.

Although, in 2008, the world’s 788 larger companies represented 41% of the 1908 companies that reported exploration budgets of at least US$100 000, they accounted for 90% of the value of their programs (Table 12). On a commodity basis, the larger companies accounted for 93% of the value of worldwide programs aimed at diamonds, for 92% of those aimed at base metals, for 92% of those aimed at platinum group metals (PGM), and for 87% of those aimed at gold.

On a regional basis, the world’s larger companies accounted for 95% of the value of the exploration programs planned for Europe and the former Soviet Union (FSU), for 93% of those planned for Africa and the Middle East, for 93% of those planned for Latin America and the Caribbean, for 87% of those planned for the United States, for 93% of those planned for other Asia-Pacific countries, for 83% of those planned for Australia, and for 84% of those planned for Canada.

World’s Smaller Companies

During 2008, the world’s smaller companies were expected to undertake exploration programs around the world with a combined value of US$1.309 billion. About 30% of the budgets of these companies were expected to be spent in Canada. In 2008, 1120 companies were classified as smaller companies, down from 1387 in 2007. Almost 56% of these companies were based in Canada.

The smaller companies are significant contributors to mineral exploration and development in many regions of the world. In many countries, the smaller companies are the only ones that undertake commercial mineral exploration. In 2008, there were eight countries where the only firms planning to be active in mineral exploration were smaller companies. This is a significant difference from previous years when up to 45 countries were visited by only small companies. Senior companies are expanding their interests in more remote/underexplored areas of the world.

The smaller companies are a significant component of the exploration activity occurring in Australia and Canada. In 2008, the smaller Canadian-based companies (companies planning to spend between US$100 000 and US$3 million) accounted for 13% of the budgets of the smaller and larger Canadian-based companies combined; in Australia, the comparable figure was 17%.

The smaller Canadian companies planned to spend US$386 million in Canada, or 53% of their worldwide budgets of US$727 million; in Australia, the comparable figures were US$288 million, or 71% of worldwide budgets of US$404 million.

Although the world’s smaller companies accounted for 10% (Table 12) of the value of all exploration programs expected to be undertaken worldwide during 2008, their activities will not be analyzed further in this chapter.

Larger Canadian-Based Companies

There are more mining companies based in Canada than anywhere else. In 2008, 431 of the world’s 788 larger companies (companies planning to spend more than US$3 million) were based in this country (Figure 11). In the previous year, 327 of the 579 larger companies were based in Canada.

In 2008, the value of the exploration programs that the larger Canadian-based companies planned to undertake in Canada and elsewhere around the world increased to more than US$4.7 billion (Figure 12), up by US$1306 million, or 38%, from the US$3.4 billion they budgeted in 2007.

The larger Canadian-based companies allocated 47% of their budgets to explore for gold, 34% to explore for base metals, 5% to explore for diamonds, and 1% to explore for PGM. The proportion of their budgets allocated to gold was essentially unchanged from 2007, while the proportion allocated to both gold and PGM remained the same, base metals decreased slightly, and diamonds increased marginally. In comparison, the average world proportions allocated to gold, base metals, diamonds, and PGM in 2008 stood at 39%, 41%, 8%, and 3%, respectively.

The value of the programs that the larger Canadian-based companies planned to undertake during 2008 was 42% of the value of all larger-company exploration programs for the entire world, a slight decrease from 2007. However, adding the value of the programs of the smaller Canadian-based companies to those of the larger ones raises the proportion of the value of exploration programs planned by Canadian-based companies here and abroad to 43% of all the activity expected worldwide.

Canadian companies account for the dominant share, by far, of the value of all mineral exploration programs planned worldwide by the larger companies. In contrast, in 2008, the larger companies based in Africa accounted for 5%, those based in Europe accounted for 13%, those based in Australia accounted for 17%, those based in the United States accounted for 57%, and South America-based companies accounted for 7%.

The larger Canadian-based companies typically budget less individually for exploration programs than the industry average worldwide. In 2008, the aggregate exploration budgets of the larger Canadian-based companies had a mean of US$6.8 million and a median of US$4.0 million. This compared with global averages of US$7.5 million and US$4.0 million, respectively. The largest Canadian mineral exploration budget in 2008 was, for the second year in a row, budgeted by Ivanhoe Mines Ltd. and was also the world’s largest at US$215 million targeted for Mongolia. The second largest mineral exploration budget by a Canadian-based company in 2008 was US$101 million by Goldcorp Inc. destined for Canada, while the largest budget of a non-Canadian company was US$119.3 million by BHP Billiton destined for Australia.

Recognizing that companies of different sizes and based in different regions of the world can have significant variations between exploration budgets and exploration expenditures, the use of aggregate budgets will generally provide a more reliable estimate of the total amount that is likely to be spent in the field.

For 2007, 1853 companies based around the world provided data for both their exploration expenditures and for their exploration budgets. Of these 1853 companies, 687 were classified as larger companies and 1166 as smaller companies. In total, these 1853 companies had planned to spend US$10.350 billion on exploration during 2007. However, by the end of the year, they had actually spent US$10.381 billion, an increase of $31 million, or less than 1%. These 687 larger companies spent US$294 million less than they had initially planned, or a decrease of about 3%. The 1166 smaller companies spent US$325 million more than they had initially planned, an increase of almost 24%. In comparison, 393 larger Canadian-based companies underspent their aggregate budgets of US$3.917 billion by US$151 million, or roughly 4%, while 665 smaller Canadian-based companies exceeded their aggregate budgets of US$803 million by US$158 million, or by more than 20%. In 2007, the departure of expenditures from the budgets of individual companies ranged between US$25 million under budget and US$63 million over budget for the larger companies and between US$2.6 million under budget and more than US$22.5 million over budget for the smaller ones. In comparison, in 2006, the larger Canadian-based companies exceeded their exploration budgets by less than 1%.www.nrcan-rncan.gc.ca/mms-smm/busi-indu/cmy-amc/content/2005/08.pdf).">¹⁰

In early 2009, companies of all sizes listed on Canadian stock exchanges held interests in a portfolio of more than 8347 mineral properties located in Canada or in more than 100 other countries around the world.¹¹ Most of this portfolio consists of properties at the early stages of exploration. The number of properties in which these companies held interests worldwide early in 2009 decreased by more than 400, or by about 5%, compared with the number that they held at the end of the previous year. The portfolio of mineral property interests decreased by 1% for properties abroad and by over 8% for domestic properties.

Larger-Company Exploration Market in Canada

In 2008, the larger-company mineral exploration market in Canada was valued at US$2008 million (Figure 13), up by over US$539 million, or 37%, from roughly US$1469 million in 2007. For the seventh year in a row, Canada remained the country where the global mineral exploration industry expected to be the most active in 2008. Australia held that position from 1992 through 2001.

In 2008, 249 of the world’s larger domestic-based or foreign-based companies planned to explore for minerals in Canada, up from 164 such companies in 2007. During 2008, more than 18% of the exploration efforts of the world’s larger companies were expected to take place in Canada, compared with 18.5% in 2007 (Figure 14). However, when the exploration programs of the smaller companies are included with those of the larger ones, the proportion of the world’s total exploration activity planned for Canada in 2008 is 19%, essentially the same as in 2006 and 2007 (if spending on uranium is included, the Canadian share would increase to just over 20%).

Larger Canadian-Based Companies in Canada

In 2008, 219 of the larger Canadian-based companies allocated, in total, almost US$1.6 billion for mineral exploration in Canada (Figure 13). Their budgets were up by about US$351 million, or 28%, from the US$1.2 billion that they allocated in 2007. For the ninth year in a row, Canadian companies planned to spend more on mineral exploration in Canada than they planned to spend in all of the Latin American countries combined. In 2008, the share of the larger-company mineral exploration market in Canada controlled by large Canadian-based companies reached 79.5%, a decrease from the high of 87% in 2006 and 85% in 2007.

In 2008, the larger Canadian-based companies allocated 34% of their global exploration budgets to programs in Canada, about 2% less than the previous year. In comparison, in 2008, the larger Australian-based companies allocated 53% of their global budgets to domestic exploration while U.S. companies allocated 35%.

Although Canadian companies operate all over the world, Canada remains the country where they conduct the largest proportion, by far, of their global mineral exploration programs (Figure 15).

Foreign-Based Companies in Canada

During 2008, 30 of the larger foreign-based companies planned to spend, in total, almost US$411 million on mineral exploration in Canada (Figure 13), compared with US$224 million in 2007. In 2008, foreign-based companies were expected to undertake 21% of all larger-company exploration programs planned for this country. Almost 49% of foreign exploration budgets for Canada were aimed at base metals, and diamonds accounted for 27%.

The larger foreign-based companies active in mineral exploration in Canada in 2008 included Newmont Mining Corp. based in the United States; Xstrata plc based in Switzerland; Vale based in Brazil; the De Beers Group based in Luxembourg; Zinifex Limited based in Australia; and Lonmin Plc, the Rio Tinto group, and Anglo American plc., all based in the United Kingdom.

In 2008, Newmont planned to spend roughly US$82 million on mineral exploration in Canada. Newmont’s budget was the largest reported for this country for that year. Almost 52% of that budget was directed at diamond exploration and 48% was directed at gold exploration.

Larger Canadian-Based Companies Abroad

In 2008, the larger Canadian-based companies planned to spend almost US$3.1 billion on mineral exploration outside of Canada (Figure 13). Their foreign budgets were up by more than US$950 million, or 44%, from the US$2.2 billion that they planned to spend in 2007.

Roughly two thirds of the worldwide budgets of the larger Canadian-based companies were allocated to programs abroad in 2008, about the same proportion as in each of the previous six years.

Almost 67% of the 431 larger Canadian-based companies planned to work abroad during 2008. Of these 431 companies, 212 (49%) planned to work only abroad while 72 (17%) planned to work in both Canada and abroad. Only 147 (34%) of the 431 larger Canadian-based companies planned to work only in this country.

Although mining is a global enterprise, undertaking exploration programs in several countries simultaneously is relatively uncommon. In 2008, only 13 (3%) of the 431 larger Canadian-based companies budgeted for programs in five or more countries, 129 (30%) budgeted for programs in two or more countries but in less than five, and 289 (67%) budgeted for programs in only one country.

At the beginning of 2009, companies of all sizes listed on Canadian stock exchanges held interests in a portfolio of 4115 mineral properties located abroad, down by 60 properties when compared to the number held at the end of the previous year.

United States

In 2008, the larger-company mineral exploration market in the United States was valued at US$793 million (Figure 13), or roughly 7% of the US$11.3 billion larger-company market worldwide. Larger-company budgets for the United States were up by US$204 million, or 35%, compared with those of the previous year. Seventy-three of the larger Canadian-based companies planned to spend, in total, almost US$443 million in the United States, up from US$341 million in 2007.

The share of the larger-company mineral exploration market held by Canadian-based companies in the United States in 2008 stood at almost 56%, down slightly from 58% the previous year. The United States moved to third place after Canada and Mexico in terms of countries where Canadian companies are the most active in mineral exploration, after being in second place in 2007 (Figure 15).

During 2008, Canadian companies planned to spend almost two thirds more than U.S. firms on mineral exploration in the United States. U.S. companies accounted for almost 37% of the value of exploration programs in their country in 2008.

The United States is likely to remain, for the foreseeable future, one of the top foreign countries where the larger Canadian-based companies hold their largest portfolio of mineral properties.

Latin America and the Caribbean

In 2008, the larger-company mineral exploration market in Latin America and the Caribbean was valued at US$2.9 billion (Figure 13), or 26% of the US$11.3 billion larger-company market world wide. The larger-company mineral exploration market in the region grew by US$1012 million, or 53%. Latin America and the Caribbean experienced the largest year-over-year percentage growth in larger-company exploration budgets of any region. The larger Canadian-based companies planned to spend US$1437 million there, up by more than US$540 million, or by over 60%, from US$897 million in 2007.

After Canada, Latin America and the Caribbean is the region of the world where Canadian companies are currently the most active in mineral exploration (Figure 13).

In 2008, Canadian companies held 49% of the larger-company mineral exploration market in Latin America and the Caribbean, up slightly from 47% the previous year. The Canadian share is the largest, by far, of all international competitors in the region and amounts to roughly US$871 million more than the amount domestic companies planned to spend there. The share of the exploration market held by local companies in the region stood at 19% in 2008.

Mexico

In 2008, the larger-company mineral exploration market in Mexico was valued at US$717 million, or roughly 6% of the US$11.2 billion larger-company market worldwide. Larger-company budgets for Mexico increased by almost US$256 million, or by 55%, compared with those of the previous year.

In 2008, Mexico ranked first in Latin America, and second in the world, in terms of countries where Canadian companies are the most active in mineral exploration (Figure 15). Seventy-one of the larger Canadian-based companies planned exploration programs for Mexico during 2008. These companies planned to spend, in total, US$523 million, which represents 73% of the larger-company market in that country.

South America

In 2008, the larger-company mineral exploration market in South America was valued at US$2.1 billion, or almost 19% of the US$11.3 billion larger-company market worldwide. From 2007 to 2008, the larger-company mineral exploration market in the region grew by US$751 million, or by more than 56%.

One hundred and twenty-one of the larger Canadian-based companies planned to spend, in total, US$867 million in South America, almost US$349 million more than during the previous year. Their programs accounted for 41% of all larger-company mineral exploration activity planned there, whereas South America-based companies exploring in that region accounted for 26%.

Countries where Canadian companies are the most active in mineral exploration include Chile, Peru, Argentina, Brazil, and Colombia, which ranked fourth, sixth, seventh, ninth, and eleventh, respectively (Figure 15).

Central America

In 2008, the larger-company mineral exploration market in Central America was valued at US$42 million, or less than 1% of the $11.3 billion larger-company market worldwide. From 2007 to 2008, the larger-company mineral exploration market decreased by US$9 million, or by 17%. The larger Canadian-based companies planned to spend US$22 million in the region.

Central America is one of the regions of the world where the smaller companies, and those based in Canada in particular, account for a substantial proportion of the mineral exploration activity that usually takes place there. In 2008, the smaller Canadian-based companies were expected to account for 97% of the $8.7 million smaller-company exploration market in that region.

Europe and the Former Soviet Union

In 2008, the larger-company mineral exploration market in Europe and the FSU was valued at US$1074 million (Figure 13), or 10% of the $11.3 billion larger-company market worldwide. From 2007 to 2008, the market in the region grew by more than US$166 million, or by almost 18%. The larger Canadian-based companies planned to spend US$299 million in the region, about US$91 million more than they had planned to spend there in 2007.

Western Europe

In 2008, the larger-company mineral exploration market in western Europe was valued at US$217 million, or roughly 2% of the $11.3 billion larger-company market worldwide. From 2007 to 2008, the larger-company mineral exploration market in the region grew by US$98 million, or almost 83%. The larger Canadian-based companies planned to spend about US$117 million in the region, almost double the amount that they had planned to spend during the previous year.

Eastern Europe

In 2008, the larger-company mineral exploration market in eastern Europe was valued at US$128 million, or roughly 1% of the $11.3 billion larger-company market worldwide. From 2007 to 2008, the market in the region grew by US$36 million. The larger Canadian-based companies planned to spend about US$84 million there, about twice the amount that they had planned to spend the previous year.

Former Soviet Union

In 2008, the larger-company mineral exploration market in the FSU was valued at US$729 million,¹² or roughly 6.5% of the $11.3 billion larger-company market worldwide. The market in the FSU grew by US$32 million. The larger Canadian-based companies planned to spend US$99 million in the FSU, up from US$85 million in 2007.

Africa and the Middle East

In 2008, the larger-company mineral exploration market in Africa and the Middle East was valued at US$1.77 billion (Figure 13), or more than 16% of the $11.3 billion larger-company market worldwide. From 2007 to 2008, exploration budgets for the region grew by US$440 million, or by over 33%. Africa accounts for almost all of the mineral exploration market in Africa and the Middle East.

Africa

In 2008, the larger-company mineral exploration market in Africa was valued at US$1.74 billion, or more than 15% of the US$11.3 billion larger-company market worldwide. From 2007 to 2008, the larger-company market there grew by US$421 million, or by 32%. The larger Canadian-based companies planned to spend US$390 million in Africa, equivalent to 22% of the larger company market on that continent. From 2007 to 2008, the larger Canadian-based companies almost doubled their budgets for Africa.

Middle East

In 2008, the larger-company mineral exploration market in the Middle East was valued at US$23 million. None of the larger Canadian-based companies planned to explore in that region of the world during 2008.

Asia-Pacific

In 2008, the larger-company mineral exploration market in Asia-Pacific was valued at US$2.7 billion (Figure 13), or more than 24% of the US$11.3 billion larger-company market worldwide. From 2007 to 2008, the larger-company market in the region grew by US$979 million. The larger Canadian-based companies planned to spend US$554 million in Asia-Pacific, equivalent to more than 20% of the market there. In 2007, the larger Canadian-based companies had planned to spend US$467 million in the region.

Southeast Asia

In 2008, the larger-company mineral exploration market in Southeast Asia was valued at almost US$350 million, or roughly 3% of the US$11.3 billion larger-company market worldwide. From 2007 to 2008, the market in the region grew by more than US$122 million.

The larger Canadian-based companies planned to spend US$73 million in the region. Their largest aggregate budgets were for Papua New Guinea, where they planned to spend US$37 million in total.

East Asia

In 2008, the larger-company mineral exploration market in East Asia, which includes China, Mongolia, and South Korea, was valued at US$570 million,12 or 5% of the US$11.3 billion largercompany market worldwide. From 2007 to 2008, the market in East Asia grew by US$79 million. The larger Canadian-based companies planned to spend US$326 million in the region, equivalent to more than 57% of the market there. They had planned to spend similar amounts the previous year.

South Pacific

In 2008, the larger-company mineral exploration market in the South Pacific was valued at US$1.7 billion, or almost 15% of the US$11.3 billion larger-company market worldwide. From 2007 to 2008, the market in the South Pacific grew by US$722 million. The larger Canadian-based companies planned to spend US$150 million in the region, about two thirds more than in 2007. The majority of their budgets for the region were destined for Australia. Australia ranks eighth in the world in terms of countries where the larger Canadian-based companies are the most active in mineral exploration (Figure 15).

South Asia

In 2008, the larger-company mineral exploration market in South Asia, which includes India and Pakistan, was valued at US$107 million, or just under 1% of the US$11.3 billion larger-company market worldwide. In 2008, the size of the market in the region grew by almost US$54 million compared to the previous year. The larger Canadian-based companies planned to spend US$15 million less in the region than in 2007.

Summary and Outlook

The year 2008 was a year of rationalizing and pulling back on planned exploration budgets by mining companies for international and domestic projects compared to the previous year. Total budgeted spending worldwide for base metals, precious metals, diamonds, and PGM reached US$12.6 billion.

The larger Canadian-based companies planned to spend a total of US$4.7 billion and the smaller Canadian-based companies planned to spend US$720 million for a total of US$5.5 billion (43% of the US$12.6 billion world total and more than for any other country or region surveyed).

The US$4.7 billion planned by the larger Canadian-based companies represented 42% of the total US$11.3 billion budgeted by all larger companies in the world. Thus, the larger Canadian-based companies held a dominant share of mineral exploration programs worldwide.

These Canadian-based larger companies planned to spend 34% (US$1.6 billion) of their budgets in Canada, 9% (US$443 million) in the United States, and 11% (US$523 million) in Mexico.

In total, there were 1300 large and small companies listed on Canadian stock exchanges in Canada in early 2009.¹¹ At the beginning of 2009, these companies held interests in more than 8300 mineral properties worldwide.

   

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