(published in March 2018)
Mineral Exploration and Deposit Appraisal ExpendituresFootnote 1
Mineral exploration plays a key role in ensuring the long-term viability of Canada’s mining industry. It leads to the discovery and development of mineral deposits that may become future mines, creates jobs—often in remote and northern communities—and attracts significant investment.
The latest national survey of company spending on mineral exploration and deposit appraisal indicates that expenditures in 2017 increased 29.6% to $2.1 billion (B)Footnote 2 compared to $1.6B in 2016. A further increase of 6.0%, to $2.2B, is expected in 2018, based on reported spending intentions (Figure 1).
Spending on mineral exploration and deposit appraisal activity largely depends on market conditions and commodity prices. The global economic context can also have an impact on companies’ ability to finance their work, since many rely on equity financing to fund their activities, especially junior companies.
Over the last decade, variations in expenditures in Canada and globally have been consistent with price trends (Figure 2). Mineral and metal prices fluctuated significantly during this period, reaching historic highs in 2011 followed by a period of persistent declines that ended in 2016. The prices of most precious and base metals began to rise in 2017 and into 2018. Prices for other commodities, however, such as uranium, have not yet started a recovery.
The number of projects, companies, and metres drilled are additional indicators of mineral exploration activity and provide important insight on trends. Between 2016 and 2017, the number of projects remained consistent at around 1,800, while the number of companies increased slightly from 657 to 689. The number of metres drilled increased substantially in 2017, climbing 53.4% to reach 4.3 million (M) metres compared to 2.8M metres in 2016.
Junior and Senior Companies
Junior companies play an important role in the discovery and development of mineral projects in Canada. Total junior company expenditures exceeded the $2B level in 2008 and 2011. But in 2013, following the economic downturn, spending fell to below the $1B mark. In 2015, at $577.8M, juniors recorded their lowest level of spending in over 12 years.
In 2016, junior company expenditures started to show signs of recovery, which continued in 2017 as spending reached $947.1M, a 49.4% increase over 2016. This figure is expected to rise again in 2018, breaking the $1B barrier.
The junior share of total exploration and deposit appraisal spending peaked in 2007, at 67.3%. It decreased in subsequent years and has remained below 50% since 2011. In 2017, spending by junior companies accounted for 44.9% of total exploration and deposit appraisal expenditures compared to 38.9% in 2016. In 2018, this share is expected to increase slightly.
Expenditures by senior mining companies surpassed the $2B level in 2011 and again in 2012. However, their spending decreased in subsequent years, falling to $994.9M in 2016, a level not seen since the global economic crisis in 2009. Senior company expenditures increased 17.0% in 2017 to $1.2B and are expected to climb to just over $1.2B in 2018.
Company Spending Distributions
The total number of junior and senior companies was 644 in 2015, 657 in 2016, and 689 in 2017 (Figure 2). The upward movement in active companies reverses the sharp downward trend that had brought population, particularly for junior companies, to levels not seen in over 10 years.
Between 2012 and 2015, there had been a significant drop in the number of companies spending $10M or more, $5M–$10M, and $1M–$5M (Figure 3). Beginning in 2016 and continuing in 2017, the number of companies and associated spending levels across each of these expenditure ranges increased. This suggests increased activity for advancing later-stage projects toward a production decision.
In 2017, 22 fewer companies spent in the less-than-$1M range than in 2016, while year-over-year growth in this range lagged behind growth in other ranges. Notably, the number of companies in the next spending range, $1M–$5M, increased by 27, suggesting that companies’ exploration budgets may be bolstered by improving market conditions (Figure 3).
Provinces and Territories
In 2017, Quebec was the leading jurisdiction in terms of spending, followed by Ontario and British Columbia (Figure 1). These three jurisdictions accounted for 64.4% of total exploration and deposit appraisal expenditures.
All jurisdictions experienced an increase in expenditures except Manitoba, Saskatchewan, and Nunavut, which recorded decreases of 18.5%, 17.0%, and 17.2%, respectively. Nova Scotia, Quebec, and Yukon experienced the largest spending increases with 264.3%, 93.8%, and 82.7%, respectively. Quebec and Ontario accounted for 85.2% of the total increase in expenditure in 2017, up $279.1M and $132.0M, respectively.
In 2018, reduced levels of spending are expected in Nunavut, Saskatchewan, Nova Scotia, and Northwest Territories. All other jurisdictions are anticipated to experience increases, notably Alberta and Manitoba, where growth of over 40% is anticipated. Quebec, Ontario, and British Columbia are expected to remain the top spending jurisdictions in 2018, with reported expenditures of $656.7M, $593.0M, and $290.9M, respectively.
Precious metals (mainly gold) remains the leading commodity group, accounting for 60% of total spending in 2016 and 65% in 2017 (Figure 4). These represent the highest ratios in over 25 years and underscore the importance of rising gold prices in recent overall price trends. Precious metals expenditures reached a cyclical peak of $2.3B in 2011 before falling to $849M in 2014. Spending increased in subsequent years, reaching $1.4B in 2017, and intentions for 2018 suggest a comparable level.
Expenditures for base metals increased 21.9% to $294.0M in 2017 and are anticipated to climb even further in 2018 by 38.4% to $406.9M.
Spending for the other metals group experienced the largest increase in percentage terms in 2017, up 81.6% to $88.9M and is expected to increase again in 2018 by 31.0%. Other metals includes cobalt and lithium, which have garnered significant attention as a result of increased demand associated with their use in electric vehicle batteries.
Expenditures on iron ore increased 16.9% in 2017 to $26.8M. This is the first increase since prices peaked and expenditures reached record levels in 2011 and 2012 at over $300M.
Uranium experienced another challenging year, with expenditures declining 18.9% in 2017 to $135.4M. A further decrease is expected again in 2018 of 23.4%, based on declining demand and the price outlook.
Expenditures for diamonds increased marginally in 2017, to $78.8M. Spending in 2018 is expected to stabilize at $76M.
Although spending for nonmetals (excluding diamonds) declined again in 2017, by 30.6% to $57.5M, it is anticipated to make a recovery in 2018 with a 44.2% increase.
Expenditures for coal (metallurgical and thermal) rose 14.8% in 2017 and are expected to increase 31.1% in 2018, buoyed by price gains for both types of coal in 2017 that are expected to continue into 2018.
Exploration and Deposit Appraisal Work Phases
Spending by work phase provides insight into activity at different stages of the development continuum. Off-mine-site exploration highlights the extent of grassroots exploration that feeds the pipeline of advanced projects. Off-mine-site deposit appraisal provides an indicator of the degree to which advanced projects are progressing toward a production decision. On-mine-site data offer information on efforts by producing companies to extend the life of existing operations.
Off-mine-site exploration spending fluctuated significantly during the past decade, consistent with price variations (Figure 5). Spending peaked in 2011 at a historic level of $2.7B, but quickly subsided in the following years, averaging $1.0B between 2013 and 2015. Expenditures began a recovery in 2016 with an increase of 11.8%. Momentum continued in 2017, with spending up 31.4% to $1.3B. Spending intentions for 2018 are currently pointing to a slight decline of 4.5% due to a combination of factors, including reduced budgets at uranium projects and the progression of some projects into the deposit appraisal phase.
Spending on off-mine-site deposit appraisal reached its lowest point in 10 years in 2016 at $390.9M. However, expenditures increased 45.3% in 2017 to $568.0M and are anticipated to continue this upward trajectory in 2018, with spending climbing a further 25.4% to $712.0M.
On-mine-site exploration and deposit appraisal has remained relatively consistent over the last six years, suggesting that senior companies are sustaining efforts to extend the life of their mines.
Figure 1. Exploration and Deposit Appraisal Expenditures,Footnote 1 by Province and Territory, 2016–18
Text Version - Figure 1
Figure 1 is a map of Canada with superimposed bar charts (three bars for the years 2016, 2017, and 2018) showing exploration and deposit appraisal expenditures (in current dollars) for each province and territory. Each bar is subdivided into two segments: one for exploration and one for deposit appraisal. The top spending jurisdictions in 2018 are expected to be Quebec ($657 million), Ontario ($593 million), and British Columbia ($291 million).
Text Version - Figure 2
Figure 2 is a bar chart showing exploration and deposit appraisal expenditures (in current dollars) by type of company and number of project operators for the years 2008 to 2018. Each bar is subdivided into two segments: the number of senior companies and the number of junior companies. A number within each segment indicates the project operators in each type of company. A line graph depicting the Bank of Canada’s Minerals and Metals Price Index is superimposed over the bar graph. A second line graph shows global exploration spending. The combined chart shows the strong correlation between metal prices and exploration and deposit appraisal spending with upward movements in the price index corresponding to rising expenditures.
Text Version - Figure 3
Figure 3 is a bar chart showing exploration and deposit appraisal expenditures (in current dollars) by range of expenditures and number of project operators for the years 2008 to 2018. Each bar is subdivided into spending intervals ranging from $1 million or less to $10 million or more. Within each spending interval, a number indicates how many project operators fall within it for the year in question. For example, in 2018, it is expected that 64 project operators will spend $10 million or more, 37 will spend $5 to $10 million, and 173 will spend $1 million to $5 million. The number of companies spending less than $1 million is not indicated in the graph.
Text Version - Figure 4
Figure 4 is a bar chart showing exploration and deposit appraisal expenditures (in current dollars) by mineral commodity for the years 2008 to 2018. For each year there are bars for precious metals, base metals, iron ore, uranium, diamonds, other metals, nonmetals, and coal. Precious metals (gold) maintains a sizeable lead, ahead of base metals, throughout the entire period.
Figure 5. Exploration and Deposit Appraisal Expenditures,Footnote 1 On- and Off-Mine-Site, 2008–18
Text Version - Figure 5
Figure 5 is a line chart showing exploration and deposit appraisal expenditures (in current dollars) by work phase for the years 2008 to 2018. The work phases are off-mine-site exploration, off-mine-site deposit appraisal, and on-mine-site exploration and deposit appraisal. The chart shows the volatility in spending within each work phase. The amounts for 2017 are preliminary, while those for 2018 are based on company spending intentions.
Source: Natural Resources Canada, from the federal-provincial/territorial Survey of Mineral Exploration, Deposit Appraisal, and Mine Complex Development Expenditures.
(p) Preliminary estimates; (si) Spending intentions.
Notes: Company budgets for 2018 expenditures had not all been finalized at the time of the survey. Data were collected from October 2017 to mid-February 2018. Figures throughout this bulletin are rounded and totals may not equal the sum of the components.
© Her Majesty the Queen in Right of Canada, as represented by the Minister of Natural Resources, 2018
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