The S&P’s Corporate Exploration Strategies (CES) 2023 report showed that macroeconomic headwinds and geopolitical tensions have taken a toll on exploration activity. Its survey of 3,100 mining companies revealed that the global aggregate nonferrous budget fell 3% year over year to $12.8 billion.
Gold budgets slipped 16% in 2023.It was enough to cancel out all gains registered by base and battery metals, since gold typically accounts for half of the global exploration budget. On a dollar basis, the gold budget dropped $1.09 billion to $5.92 billion, the largest year-over-year drop in a decade. Junior companies, which account for half of gold exploration, are usually the first to be impacted when financial conditions tighten.
Green metals specifically copper, nickel and lithium posted strong budget growth. Copper budget rose by 12% to $3.12 billion, the highest year-over-year increase since 2014, and the third consecutive year of double-digit percentage growth. Lithium budgets were the most noteworthy, increasing by 77% year over year to $829.6 million. Nickel budgets rose by 19% year over year with a budget of $732.2 million.
The only regions to post gains in 2023 were Latin America, the U.S. and Asia-Pacific. Latin America continues to attract the largest share of the global exploration budget, since the beginning of the CES study. The region’s budget was up 2.3% year over year to $3.38 billion. Asia-Pacific, the smallest region by allocation, registered a budget of $370 million, up 8.8%, the largest percentage increase in all regions.
Junior explorers (companies with less than $50 million in revenue), the driving force in the post-pandemic exploration recovery, lost steam in 2023 as budgets fell 4.5% year over year to $5.36 billion. The weakening financing conditions impacted the juniors to a much greater extent. Major mining companies did not pull back on exploration and posted a collective budget of $6.02 billion, a 1.2% rise.
Grassroots budgets’ downward trend resumed in 2023, declining 9.8% to $2.99 billion, the largest drop among stages in percentage and dollar terms. The larger-than-average decline pulled down the early-stage share of overall budgets to 23.4%, the lowest share on record. At the beginning of the CES study, grassroots exploration typically garnered about 50% of all exploration budgets, but it began losing share in 2004 and has not recovered since. Budgets for late-stage exploration and feasibility work posted the only year-over-year increase in 2023. Allocations came in at $4.89 billion, and the 3.8% increase was enough for the stage to narrowly rank first both in dollar terms and by share of the global budget (38.34%) for the first time, since 2018. Minesite exploration came in at $4.88 billion, down 3.7% year over year, causing the group to lose out on the top spot; mine site exploration accounts for 38.27% of overall budgets.
As raising funds became more difficult, junior explorers were disproportionally affected and therefore accounted for the bulk of the decrease. For 2024, S&P is forecasting exploration budgets to hover around current levels; however, should the macro environment and financing conditions remain as is, the firm believes that a modest year-over-year decline (less than 5%) is the most likely scenario.
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