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5. Canadian Global Exploration Activity


Printable version - PDF (410 kb)

Arlene Drake

The author is a senior exploration analyst with the Minerals and Metals Sector,
Natural Resources Canada.
Telephone: 613-992-7568
E-mail: arlene.drake@nrcan-rncan.gc.ca

INTRODUCTION

This article provides an overview of Canadian mineral exploration activity1 abroad. It also highlights the domestic and foreign components of the larger-company exploration market in Canada.

GLOBAL MARKET FOR MINERAL EXPLORATION

The value of exploration programs expected to be undertaken worldwide in 2009 for precious metals, base metals, and diamonds (Table 5.1) reached US$7.3 billion, down by US$5.3 billion, or almost 42%, from the US$12.6 billion that companies had planned to spend in 2008.2 The value of these programs includes the budgets of both the larger companies and 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 2009. Canada’s share of global exploration declined to 16% in 2009 from 19% in 2008 (Figure 5.1). For the third year, the Metals Economics Group (MEG) has included uranium in its survey of companies’ 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 on mineral exploration in 2009, while 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. This definition of larger and smaller companies should not be confused with the MEG definition where the division is based on revenue for the senior companies and equity financing for the juniors. In fact, in recent years, the larger-company category has included an increasing number of “junior” companies as the equity markets were providing juniors with significant financing.

The number of companies that reported mineral exploration budgets of at least US$100 000 in 2009 decreased to 1844, down by 64 firms, or over 3%, from 1908 firms in the previous year. As a group, these 1844 companies planned to spend US$7.3 billion in 130 countries, 8 more countries than in the years 2006 to 2008. Of these companies, a total of 991, or over 53%, were based in Canada.3 Exploration budgets, which had increased for six years in a row, were slashed in 2009.

Compared with the previous year, the budgets of companies that planned to spend at least US$100 000 on mineral exploration in 2009 increased for about 27% of the countries in which they expected to operate. Aggregate year-over-year company budgets grew by US$19 million for Saudi Arabia, by US$12 million for Bolivia, by US$9 million for Iran, by US$8 million for Ivory Coast, by US$7 million for Senegal, by US$6 million for Poland, and by US$5 million for Yemen. Exploration increases in Saudi Arabia, Bolivia, and Iran are due almost entirely to spending by either locally headquartered companies or national government organizations. Ivory Coast and Senegal are being targeted for gold exploration, largely by one or two companies. Although amounts are significant for the individual countries in which those increases were recorded, the amounts in question were considerably less in absolute terms than those that were posted for traditional mining countries where spending was expected to decrease.

With respect to the 96 countries where exploration budgets were expected to decrease from 2008 to 2009, the largest decrease was in Canada (down US$1229 million) and the second largest decrease was in Australia (down US$795 million). Budgets decreased by US$434 million in the United States, by US$406 million in Mexico, by US$193 million in Peru, by US$186 million in Russia, by US$162 million in each of Brazil and Chile, and by US$158 million in South Africa. According to MEG,1 the economic crisis has resulted in lower budget allocations for almost every country regardless of risk profile.

In 2009, total lost budgets were an astonishing US$5405 million, a clear indication of the damage caused by the economic downturn to the global exploration sector. Junior companies that had record spending in previous years and that held an increasing share of global exploration spending have been especially hard hit by the economic crisis that resulted in equity markets becoming increasingly risk averse and therefore less welcoming to junior issuers. MEG1reports a 6% reduction in the number of junior companies in the 2009 survey. These junior companies saw their budgets grow by an average of 60% from 2002 to 2008 and, in 2009, they experienced a 55% decrease. Canada and Australia have a significant portion of their domestic exploration carried out by juniors, so this decline in company numbers and spending has had a huge impact on these two countries.

 

Figure 5.1: Distribution of Global Exploration Budgets, by Location, 2009

WORLD’S LARGER COMPANIES

Global trends in mineral exploration are generally based on data for the world’s larger companies (companies planning on spending more than US$3 million). The focus of this chapter is on this group of companies.

During 2009, the world’s larger companies were expected to undertake exploration programs with a combined value of US$6.123 billion in 107 countries, one less country than in 2008. As a result of the global economic crisis, the aggregate budgets of the world’s larger companies decreased by almost 46%, down from US$11.292 billion in the previous year.

In 2009, the number of companies based around the world that intended to spend at least US$3 million on mineral exploration plunged to 404 (Figure 5.2), a steep decrease after four years of record high numbers. In 2008, 788 companies had planned to spend an equivalent amount.

In 2009, the world’s 404 larger companies represented 22% of the 1844 companies that reported exploration budgets of at least US$100 000. They accounted for about 84% of the value of planned programs (Table 5.1). On a commodity basis, the larger companies accounted for 86% of the value of worldwide programs aimed at diamonds, for 87% of those aimed at base metals, for 90% of those aimed at platinum group metals (PGM), and for 83% 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 95% of those planned for Africa and the Middle East, for 98% of those planned for Latin America and the Caribbean, for 89% of those planned for the United States, for 91% of those planned for other Asia-Pacific countries, for 77% of those planned for Australia, and for 74% of those planned for Canada.

 

Figure 5.2: Distribution of the World's Larger Exploration Companies, by Domicile, 2009

WORLD’S SMALLER COMPANIES

During 2009, the world’s smaller companies (companies planning to spend between US$100 000 and US$3 million) were expected to undertake exploration programs around the world with a combined value of US$1.193 billion. About 55% of the budgets of these companies were expected to be spent in Canada. In 2009, 1440 companies were classified as smaller companies, up from 1120 in 2008. Over 57% of these smaller companies were based in Canada.

The smaller companies are significant contributors to mineral exploration and development in many regions of the world. In numerous countries, the smaller companies are the only ones that undertake commercial mineral exploration. In 2009, there were 22 countries where the only firms planning to be active in mineral exploration were smaller companies. This is a significant increase from the previous year when only 8 countries were visited by only small companies.

The smaller companies are a significant component of the exploration activity occurring in Australia and Canada. In 2009, the smaller Canadian-based companies accounted for 26% of the budgets of the smaller and larger Canadian-based companies combined; in Australia, the comparable figure was 23%.

The smaller Canadian companies planned to spend US$312 million in Canada, or almost 48% of their worldwide budgets of US$654 million; in Australia, the comparable figures were US$240 million, or almost 72% of their worldwide budgets of US$334 million.

Although the world’s smaller companies accounted for just over 16% (Table 5.1) of the value of all exploration programs expected to be undertaken worldwide during 2009, 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 2009, 165 of the world’s 404 larger companies (companies planning to spend more than US$3 million) were based in this country (Figure 5.2). In the previous year, 431 of the 788 larger companies were based in Canada. In 2009, the value of the exploration programs that the larger Canadian-based companies planned to undertake in Canada and elsewhere around the world decreased significantly to US$1.8 billion (Figure 5.3), down by US$2.9 billion, or 61%, from the US$4.7 billion they had budgeted in 2008.

The larger Canadian-based companies allocated 68% of their budgets to explore for gold, 22% to explore for base metals, 2% to explore for diamonds, and less than 1% to explore for PGM. The proportion of their budgets allocated to gold was larger than in 2008, while the proportions allocated to diamonds, PGM, and base metals decreased. In comparison, the average world proportions allocated to gold, base metals, diamonds, and PGM in 2009 stood at 48%, 36%, 5%, and 2%, respectively.

The value of the programs that the larger Canadian-based companies planned to undertake during 2009 was 30% of the value of all larger-company exploration programs for the entire world, a decrease from 42% in 2008. 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 34% of all the activity expected worldwide. The budgets of the larger Canadian-based companies dropped by 9% for Canada from 2008 to 2009, compared with a 6% increase in the Asia-Pacific region. From 2006 to 2008, Canada, Mongolia, South Africa, the United States, Brazil, and Mexico all made budgetary gains, but gave those up in 2009 to almost break even or suffer small losses in aggregate budgets. Peru and Chile suffered the least by recording budget gains from 2006 to 2009 despite the economic crisis and declining budgets.

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 2009, the larger companies based in Africa accounted for 8%, those based in Europe-FSU accounted for 20%, those based in Australia accounted for 18%, those based in the United States accounted for over 6%, and Latin America-based companies accounted for almost 11%.

The larger Canadian-based companies typically budget less individually for exploration programs than the industry average worldwide. In 2009, the aggregate exploration budgets of the larger Canadian-based companies had a mean of US$11 million and a median of US$6 million. This compared with global averages of US$15 million and almost US$7 million, respectively. The largest Canadian mineral exploration budget in 2009 was that of Barrick Gold Corp. (US$155 million) where 45% of the corporate exploration budget was targeted for the United States, 46% for Latin America, and less than 1% for Canada. The world’s largest budget was US$410.5 million by BHP Billiton plc; 32% of this company’s exploration budget was targeted for the Asia-Pacific region (mostly Australia) and 24% was targeted for Canada (mostly for potash exploration in Saskatchewan). The second largest mineral exploration budget by a Canadian-based company in 2009 was US$101 million by Goldcorp Inc. with 54% of the corporate exploration budget destined for Canada and 40% planned for Mexico.

Recognizing that companies of different sizes 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 2008, 1719 companies based around the world provided data for both their exploration expenditures and their exploration budgets. Of these 1719 companies, 783 were classified as larger companies and 936 as smaller companies. In total, these 1719 companies had planned to spend US$12.593 billion on exploration during 2008. However, by the end of the year, they had actually spent US$12.375 billion, a decrease of $219 million, or 2%. The 783 larger companies spent US$233 million less than they had initially planned, or a decrease of about 2%. The 936 smaller companies spent US$15 million more than they had initially planned, an increase of more than 1%. In comparison, 416 larger Canadian-based companies underspent their aggregate budgets of US$4.680 billion by US$295 million, or roughly 6%, while 647 smaller Canadian-based companies underspent their aggregate budgets of US$623 million by US$236 million, or by more than 37%. This highlights once again the financing difficulties for smaller companies brought about by the economic downturn. In 2008, the departure of expenditures from the budgets of individual companies ranged between US$37 million under budget and US$80 million over budget for the larger companies and between US$27 million under budget and just over US$2 million over budget for the smaller ones. In comparison, in 2007, the larger Canadian-based companies underspent their exploration budgets by 4%.4

In late 2009, companies of all sizes listed on Canadian stock exchanges held interests in a portfolio of more than 7784 mineral properties located in Canada, or in just under 100 other countries around the world.5 Most of this portfolio consists of properties at the early stages of exploration. The number of properties in which these companies held interests worldwide in 2009 decreased by more than 560, or by about 7%, compared with the number that they held at the end of the previous year. The portfolio of mineral property interests decreased by 12% for properties abroad and by over 10% for domestic properties. In reaction to the economic crisis, companies decreased the number of properties they were actively exploring in order to conserve cash.

 

Figure 5.3: Exploration Budgets of the World's Larger Companies, by Domicile, 1999-2009

LARGER-COMPANY EXPLORATION MARKET IN CANADA

In 2009, the larger-company mineral exploration market in Canada was valued at US$849 million (Figure 5.4), down by over US$1159 million, or 58%, from roughly US$2008 million in 2008. However, when the exploration programs of the smaller companies are included, Canada remained, for the eighth year in a row, the individual country (as opposed to entire regions) where the global mineral exploration industry expected to be the most active in 2009. Australia held that position from 1992 through 2001.

In 2009, 105 of the world’s larger domestic-based or foreign-based companies planned to explore for minerals in Canada, down from 249 such companies in 2008. During 2009, almost 14% of the exploration efforts of the world’s larger companies were expected to take place in Canada, compared with 18% in 2008 (Figure 5.5). 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 2009 is 16%, still a significant decrease from the 19% level reached in each of 2006 and 2007 (if spending on uranium is included, the Canadian share remains at 16%).

Larger Canadian-Based Companies in Canada

In 2009, 76 of the larger Canadian-based companies allocated, in total, almost US$554 million for mineral exploration in Canada (Figure 5.4). Their budgets were down by about US$1044 million, or 65%, from the US$1.6 billion that 219 larger Canadian-based companies allocated in 2008. In 2009, Canadian companies planned to spend more on mineral exploration in a foreign region (Latin America) than they planned to spend in Canada. Also in 2009, the share of the larger-company mineral exploration market in Canada controlled by large Canadian-based companies was 65%, a decrease from the high of 87% in 2006.

In 2009, the larger Canadian-based companies allocated 30% of their global exploration budgets to programs in Canada, about 4% less than in the previous year. In comparison, in 2009, the larger Australian-based companies allocated almost 40% of their global budgets to domestic exploration while U.S. companies allocated 24%. MEG1 notes that acquisitions of large Canadian-based companies such as Vale’s takeover of Inco and Xstrata’s takeover of Falconbridge have moved “Canadian” exploration budgets to overseas locations. So far, any negative effects of this regional re-allocation of exploration spending have been masked by strong junior company spending but, in economically trying times, it may result in decreasing Canadian influence in the exploration market.

Although larger 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 5.6).

 

Figure 5.4: Exploration Budgets of the World's Larger Companies for Selected Regions of the World, 2008 and 2009

 

Figure 5.5: Exploration Budgets of the World's Larger Companies for Canada and Elsewhere, 1998-2009

Foreign-Based Companies in Canada

During 2009, 29 of the larger foreign-based companies planned to spend, in total, US$295 million on mineral exploration in Canada (Figure 5.4), compared with US$411 million in 2008. In 2009, foreign-based companies were expected to undertake over 34% of all larger-company exploration programs planned for this country. Almost 36% of foreign exploration budgets for Canada were aimed at base metals, 15% at gold, 10% at diamonds, and 5% at PGM. The “other” category jumped to 35% of spending targeted for Canada. The companies spending in this category included BHP Billiton plc, Vale S.A., JOCMEG, and Zhongchuan International, with a significant portion of that total directed at potash exploration.

The larger foreign-based companies active in mineral exploration in Canada in 2009 included BHP Billiton plc based in the United Kingdom and Australia; Vale S.A. based in Brazil; Newmont Mining Corp. based in the United States; Xstrata plc based in Switzerland; the De Beers Group based in Luxembourg; Jilin Ji’en Nickel Industry Co. Ltd., and Shaanxi Non-Ferrous Metals Group, both based in China; Lonmin Plc, the Rio Tinto group, Anglo Gold Ashanti, and Anglo American plc., all based in the United Kingdom; and Magma Metals Limited based in Australia.

In 2009, BHP Billiton planned to spend roughly US$100 million on mineral exploration in Canada. Its budget was the largest reported for this country for the year. Of that budget, 94% (US$94 million) was directed at potash exploration and 6%, or US$6 million, was directed at diamond exploration.

 

Figure 5.6: Exploration Budgets of the Larger Canadian-Based Companies, 2009 - Countries Accounting for 90% of Canadian Budgets

LARGER CANADIAN-BASED COMPANIES ABROAD

In 2009, the larger Canadian-based companies planned to spend almost US$1.3 billion on mineral exploration outside of Canada (Figure 5.4). Their foreign budgets were down by almost US$1.9 billion, or over 59%, from the US$3.1 billion that they planned to spend in 2008.

Two thirds of the worldwide budgets of the larger Canadian-based companies were allocated to programs abroad in 2009, about the same proportion as in each of the previous seven years.

Over 67% of the 165 larger Canadian-based companies planned to work abroad during 2009. Of these 165 companies, 90 (55%) planned to work only abroad while 21 (13%) planned to work in both Canada and abroad. Only 54 (33%) of the 165 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 2009, only 9 (5%) of the 165 larger Canadian-based companies budgeted for programs in five or more countries, 46 (28%) budgeted for programs in two or more countries but in less than five, and 110 (67%) budgeted for programs in only one country.

At the end of 2009, companies of all sizes listed on Canadian stock exchanges held interests in a portfolio of 3662 mineral properties located abroad, down by 513 properties when compared to the number held at the end of the previous year.

United States

In 2009, the larger-company mineral exploration market in the United States was valued at almost US$377 million (Figure 5.4), or roughly 6% of the US$6.1 billion larger-company market worldwide. Larger-company budgets for the United States were down by US$416 million, or 53%, compared with those of the previous year. Thirty-seven of the larger Canadian-based companies planned to spend, in total, US$221 million in the United States, compared to US$222 million in 2008.

The share of the larger-company mineral exploration market held by Canadian-based companies in the United States in 2009 stood at almost 59%, up slightly from 56% the previous year. The United States regained second place after Canada in terms of countries where Canadian companies are the most active in mineral exploration, after being in third place (after Mexico) in 2008 (Figure 5.6).

During 2009, Canadian companies planned to spend twice as much as U.S. firms on mineral exploration in the United States. U.S. companies accounted for almost 26% of the value of exploration programs in their country in 2009.

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 2009, the larger-company mineral exploration market in Latin America and the Caribbean was valued at US$1.7 billion (Figure 5.4), or 28% of the US$6.1 billion larger-company market worldwide. The larger-company mineral exploration market in the region shrank by US$1194 million, or 41%. The larger Canadian-based companies planned to spend US$556 million there, down by more than US$880 million, or by over 61%, from US$1437 million in 2008.

Latin America and the Caribbean is the region of the world where Canadian companies are currently the most active in mineral exploration (Figure 5.4). Almost 50% of the larger Canadian-based company budgets for Latin America and the Caribbean were targeted at Mexico and Chile.

In 2009, Canadian companies held 32% of the larger-company mineral exploration market in Latin America and the Caribbean, down from 49% the previous year. The Canadian share is the largest, by far, of all international competitors in the region and is roughly US$59 million more than the amount domestic companies planned to spend there. The share of the exploration market held by local companies in the region increased to 29% in 2009.

Mexico

In 2009, the larger-company mineral exploration market in Mexico was valued at US$304 million, or roughly 5% of the US$6.1 billion larger-company market worldwide. Larger-company budgets for Mexico decreased by US$413 million, or 58%, compared with those of the previous year.

In 2009, Mexico ranked first in Latin America, and third in the world, in terms of countries where Canadian companies were the most active in mineral exploration (Figure 5.6). Twenty-eight of the larger Canadian-based companies planned exploration programs for Mexico during 2009. These companies planned to spend, in total, over US$159 million, which represents 52% of the larger-company market in that country.

South America

In 2009, the larger-company mineral exploration market in South America was valued at almost US$1.4 billion, or more than 22% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the larger-company mineral exploration market in the region declined by US$735 million, or by 35%. Thirty-eight of the larger Canadian-based companies planned to spend, in total, US$370 million in South America, almost US$497 million less than during the previous year. Their programs accounted for 27% of all larger-company mineral exploration activity planned there, the same share as the South America-based companies. Countries where Canadian companies are the most active in mineral exploration include Chile, Peru, Brazil, Argentina, and Ecuador (Figure 5.6).

Central America

In 2009, the larger-company mineral exploration market in Central America was valued at almost US$23 million, or less than 1% of the $6.1 billion larger-company market worldwide. From 2008 to 2009, the larger-company mineral exploration market decreased by almost US$20 million, or about 47%. The larger Canadian-based companies planned to spend almost US$13 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 is usually undertaken in the region. In 2009, the smaller Canadian-based companies were expected to account for 90% of the $5.2 million smaller-company exploration market in that region.

Europe and the Former Soviet Union

In 2009, the larger-company mineral exploration market in Europe and the Former Soviet Union (FSU) was valued at US$650 million (Figure 5.4), or almost 11% of the $6.1 billion larger-company market worldwide. From 2008 to 2009, the market in the region decreased by US$424 million, or by 40%. The larger Canadian-based companies planned to spend US$132 million in the region, about US$167 million less than they had planned to spend there in 2008.

Western Europe

In 2009, the larger-company mineral exploration market in western Europe was valued at US$118 million, or roughly 2% of the $6.1 billion larger-company market worldwide. From 2008 to 2009, the larger-company mineral exploration market in the region shrank by US$99 million, or almost 46%. The larger Canadian-based companies planned to spend about US$48 million in the region, almost 59% less than the amount they had planned to spend during the previous year.

Eastern Europe

In 2009, the larger-company mineral exploration market in eastern Europe was valued at US$56 million, or 1% of the $6.1 billion larger-company market worldwide. From 2008 to 2009, the market in the region declined by US$73 million. The larger Canadian-based companies planned to spend approximately US$32 million there, about 62% less than the amount they had planned to spend the previous year.

Former Soviet Union

In 2009, the larger-company mineral exploration market in the FSU was valued at US$477 million,6 or roughly 8% of the $6.1 billion larger-company market worldwide. The market in the FSU decreased by US$253 million. The larger Canadian-based companies planned to spend US$52 million in the FSU, down from US$99 million in 2008.

Africa and the Middle East

In 2009, the larger-company mineral exploration market in Africa and the Middle East was valued at US$1.0 billion (Figure 5.4), or more than 16% of the $6.1 billion larger-company market worldwide. From 2008 to 2009, exploration budgets for the region decreased by US$760 million, or by 43%. Africa accounts for almost all of the mineral exploration market in Africa and the Middle East.

Africa

In 2009, the larger-company mineral exploration market in Africa was valued at US$940 million, or more than 15% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the larger-company market there decreased by US$804 million, or by 46%. The larger Canadian-based companies planned to spend US$188 million in Africa, equivalent to almost 20% of the larger company market on that continent. From 2008 to 2009, the larger Canadian-based companies budgeted 52% less for Africa.

Middle East

In 2009, the larger-company mineral exploration market in the Middle East was valued at US$67 million. None of the larger Canadian-based companies planned to explore in that region of the world during 2009.

Asia-Pacific

In 2009, the larger-company mineral exploration market in Asia-Pacific was valued at US$1.5 billion (Figure 5.4), or more than 24% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the larger-company market in the region declined by US$1.2 billion. The larger Canadian-based companies planned to spend US$173 million in Asia-Pacific, equivalent to 11% of the market there. In 2008, the larger Canadian-based companies had planned to spend US$554 million in the region.

Southeast Asia

In 2009, the larger-company mineral exploration market in Southeast Asia was valued at almost US$227 million, or roughly 4% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the market in the region shrank by US$123 million.

The larger Canadian-based companies planned to spend about US$24 million in the region. All budgets were destined for Papua New Guinea.

East Asia

In 2009, the larger-company mineral exploration market in East Asia, which includes China, Mongolia, and South Korea, was valued at US$359 million,7 or almost 6% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the market in East Asia declined by US$211 million. The larger Canadian-based companies planned to spend almost US$100 million in the region, equivalent to more than 27% of the market there. They planned to spend almost 70% less than the previous year.

South Pacific

In 2009, the larger-company mineral exploration market in the South Pacific was valued at US$843 million, or almost 14% of the US$6.1 billion larger-company market worldwide. From 2008 to 2009, the market in the South Pacific decreased by US$853 million. The larger Canadian-based companies planned to spend US$43 million in the region, about 70% less than in 2008. The majority of their budgets for the region were destined for Australia. Australia ranks tenth in the world in terms of countries where the larger Canadian-based companies are the most active in mineral exploration (Figure 5.6).

South Asia

In 2009, the larger-company mineral exploration market in South Asia, which includes India and Pakistan, was valued at US$64 million, or just over 1% of the US$6.1 billion larger-company market worldwide. In 2009, the size of the market in the region declined by almost US$43 million compared to the previous year. The larger Canadian-based companies planned to spend 17% less in the region than in 2008.6

SUMMARY AND OUTLOOK

The year 2009 started in the midst of a sharp economic downturn that found mining and exploration companies slashing costs, delaying projects, and closing mines in order to survive and conserve financial resources. Total budgeted spending worldwide for base metals, precious metals, diamonds, and PGM was US$7.3 billion. Gold projects faired the best as the price of gold was an exception to declining metal prices.

Globally, exploration declined by 42% from 2008 values, with the largest decrease recorded in Canada (US$1.2 billion) followed by declines in Australia (US$795 million), the United States (US$434 million), and Mexico (US$406 million). According to MEG,1 the economic crisis resulted in lower budget allocations for almost every country regardless of risk profile.

The larger Canadian-based companies planned to spend a total of US$1.8 billion, a decrease of 61% from 2008 amounts. Smaller Canadian-based companies planned to spend US$654 million for a Canadian total of US$2.5 billion (34% of the US$7.3 billion world total). Despite the significant decrease in market share and exploration budgeting, Canada spent more than any other country or region surveyed.

However, in 2009, Canadian-based companies planned to spend more on mineral exploration in a foreign region (Latin America) than they planned to spend in Canada. Because of the significant number of domestically headquartered junior exploration companies, Canada felt the impact of a significant decrease in the budgets of junior companies.

The US$1.8 billion planned by the larger Canadian-based companies represented 30% of the total US$6.1 billion budgeted by all larger companies in the world. Thus, the larger Canadian-based companies continued to hold a dominant share of mineral exploration programs worldwide.

These Canadian-based larger companies planned to spend 35% (US$866 million) of their budgets in Canada, 12% (US$288 million) in the United States, and 9% (US$230 million) in Mexico.

In reaction to the economic crisis, companies decreased the number of properties they were actively exploring in order to preserve their assets and conserve cash. In total, there were 1387 large and small companies listed on Canadian stock exchanges in Canada in late 2009.5 At the end of 2009, Canadian companies, both large and small, held interests in more than 7784 mineral properties worldwide.

Altogether, Canadian companies are well positioned to take advantage of improving economic conditions and to advance some of these properties further along the mineral development curve.

ENDNOTES

1 Most of the statistical data on the larger-company mineral exploration market are based on Corporate Exploration Strategies: A Worldwide Analysis, published annually by the Metals Economics Group (MEG) of Halifax, Nova Scotia. MEG defines exploration as work from the earliest stage through perimeter drilling, reconnaissance, and evaluative forays, as well as work to further quantify and define an identified orebody once the target outline stage has been completed. It includes all feasibility work up to the point of a production decision.

2 All currencies in this review are expressed in current U.S. dollars, except for the use of constant dollars in some of the figures. Dollar amounts and percentages have been rounded to the nearest significant digit.

3 Companies are defined as being Canadian-based if they are categorized by MEG as headquartered in Canada in the report entitled Corporate Exploration Strategies: A Worldwide Analysis.

4 See “Canada’s Global Exploration Activity” in the 2008 edition of Overview and Trends in Canadian Mineral Exploration, Natural Resources Canada, Ottawa (www.nrcan-rncan.gc.ca/mms-smm/busi-indu/pdf/explor/2008/explor-2008-eng.pdf).

5 For 1998 through 2009, the data are derived from InfoMine db. These databases are products of Robertson Info-Data Inc. of Vancouver, British Columbia, Canada.

6 The size of the mineral exploration market in certain regions of the world is underestimated because there are few data available on the extent of exploration programs undertaken by some private enterprises and state agencies.

7 Note: Asia-Pacific categories do not add up as unspecified regional spending was not categorized.

Note: Information in this chapter was current as of December 2009.

Note to Readers

The intent of this document is to provide general information and to elicit discussion. It is not intended as a reference, guide or suggestion to be used in trading, investment, or other commercial activities. The author and Natural Resources Canada make no warranty of any kind with respect to the content and accept no liability, either incidental, consequential, financial or otherwise, arising from the use of this document.


 

TABLE 5.1 WORLDWIDE EXPLORATION BUDGETS FOR PRECIOUS METALS, BASE METALS, AND DIAMONDS, BY TYPE OF COMPANY AND BY DOMICILE OF COMPANY, 2009
  Canada Australia Africa-
Middle East
Europe-
FSU
United States Latin
America
Other
Asia-Pacific
Total Proportion of Subtotal
($ millions) (%)
Larger companies 1 825.8 1 113.6 462.6 1 221.7 395.3 655.3 449.0 6 123.3 83.7
Smaller companies 653.9 334.0 23.6 70.5 48.7 15.9 46.4 1 193.0 16.3
Total 2 479.7 1 447.6 486.2 1 292.2 444.0 671.2 495.4 7 316.3 100.0

Source: Natural Resources Canada, based on Corporate Exploration Strategies: A Worldwide Analysis, Metals Economics Group, Halifax, Nova Scotia.
Notes: "Larger companies" are defined here as those with budgets for mineral exploration in 2009 of US$3 million or more. Numbers may not add to totals due to rounding.