• Ian Jackman

Mineral Exploration Update

With PDAC in full swing, an optimistic mood may be rising within the gathering in the halls.

It's always great to see the latest technologies, touch base with industry colleagues, and share stories and experiences.

Beware of unsubstantiated reports of optimism in the industry.

The PDAC report - "State of Mineral Finance 2019" - indicates a dramatic shift in the global exploration spend by commodity type compared to a decade ago (see graphic below), largely on the back of soft commodity prices and global economic uncertainty.

Global Exploration Spend by Commodity 2018*

And that's only part of a broader picture. The estimated fleet of mineral exploration drill rigs has declined by nearly 40%. Rig utilization remains stubbornly low at around 45%. Average active rig counts are estimated at a lowly 35% of previous highs in 2011/12, and drilling revenues are similarly affected.

Exploration drilling revenue sources have also changed: by commodity type the split shows the focus on gold and copper projects that make up around 74%. (see below)

By project stage the split shows the contraction of greenfield projects to brownfield projects at 13% to 59% respectively (see below) - where previously the revenue source splits were more equal.

The PDAC report also shows an odd anomoly - a difference between the reported financing of junior miners split by commodity to the exploration spend. (See below) Something seems out of whack.

Global Junior Miner Financing by Commodity 2018*

Overall, the mineral exploration drilling industry is not in good health. Strong headwinds persist.

There are other problems too: Staffing issues and shortages arise because many experienced drilling personnel have left the industry and are unlikely to return. Loss of skills to the industry leaves inexperienced workers who are being promoted to more senior positions. Attracting and training new workers and talent to the industry is an uphill battle.

Skill and productivity related field problems create even more difficulties to keep projects on track. Contract drilling rates are still under pressure. And that translates into reduced contractor profitability with consequent lack of investment in equipment, technology, maintenance and personnel.

Altogether, it's going to be tough work out there for the exploration project manager who has a hard-won project in hand, and is expected to bring it in on budget.

If I can help you deliver that result, then call me anytime.

Some actions you can take now:

Visit us at: www.brightearthconsulting.co.uk/drilling

Start reading the DD-PSO series to get ahead of the game: https://www.brightearthconsulting.co.uk/shop

Contact Ian here: www.brightearthconsulting.co.uk/contact

* Graphics from PDAC "State of Mineral Finance 2019" report reference: https://www.pdac.ca/docs/default-source/priorities/access-to-capital/pdac-state-of-mineral-finance-2019.pdf

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