Mining Exploration Is Making Comeback After Four-Year Slump

(Bloomberg) -- After a four-year slump, mining companies are spending on exploration again as interest in base metals rebounds and clean technologies boost demand for niche battery ingredients.

Miners spent $8.4 billion searching for new metal deposits last year, about 15 percent more than in 2016, according to a report published Monday by S&P Global Market Intelligence. That exploration spending, which doesn't include money used searching for iron ore, could increase again by as much as 20 percent this year, S&P said.

"Improved equity market support for explorers allowed many companies to launch or resume drill programs," said Mark Ferguson, associate director of research for metals and mining at S&P. "Our year-end measure of exploration-sector activity reached levels not seen since early 2013."

Gold led the way, accounting for more than 70 percent of the year-on-year increase in spending, followed by base metals copper, nickel, and zinc, all trading at multiyear highs.

Exploration for battery ingredients lithium and cobalt surged at smaller mining companies. Spending on lithium projects across 136 junior miners doubled, while expenditure on cobalt exploration quadrupled.

Still, the world's biggest mining companies kept exploration spending at low levels, preferring to return cash to shareholders. Miners with revenues of more than $1 billion last year likely spent roughly the same percentage of revenue as 2016, when the figure reached 1.8 percent, down from 3.2 percent in 2012.

--With assistance from David Stringer

To contact the reporter on this story: Tom Wilson in London at twilson128@bloomberg.net.

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Tony Barrett, Nicholas Larkin

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