Responding to rising prices and more stable market conditions, most companies increased their exploration budgets in 2010, resulting in a 44% rise in the estimated worldwide exploration total for 2010. According to Metals Economics Group’s (MEG) 21st edition of Corporate Exploration Strategies, the estimated total 2010 budget for nonferrous metals exploration reached $12.1 billion, reinstating almost two-thirds of the industry’s $6 billion in cuts to exploration in 2009.

After rising for six straight years to an all-time high of $14.4 billion in 2008, nonferrous exploration budgets dropped 42% in 2009 as the global economic crisis and declining prices for almost all commodities took their toll on the industry. Metals prices—the primary driver of exploration spending—have improved markedly since bottoming in early 2009. In response, major, intermediate and junior companies have all increased their aggregate exploration allocations in 2010. Improvement in availability of equity financings for juniors over the past 12-18 months has allowed this group to account for the largest share of the overall increase in exploration spending.

According to MEG, most companies saw year-on-year increases in allocations; however, the industry’s overall appetite for risk has not returned to levels prior to the economic downturn. The threat of resource nationalism continues to adversely affect exploration levels in certain countries considered to be higher risk, while other countries with elevated risk profiles showed only modest increases.

In addition, early-stage exploration, which  tends to be cut first when risk rises (or tolerance for risk declines), has all but dried up in many of these countries, with explorers focused on advanced projects and mines that are harder to abandon.

MEG said its 2010 exploration estimate is based on information from more than 3,200 companies, of which more than 2,200 had exploration budgets in 2010. These 2,200 companies (each budgeting at least $100,000) have together budgeted $11.51 billion for nonferrous exploration in 2010, estimated to cover about 95% of commercially oriented nonferrous exploration budgets. Including estimates for all budgets that MEG could not obtain, the 2010 worldwide total exceeds $12.1 billion.

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