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Comparatively high exploration spending belies sagging discovery rate – S&P Global

3rd May 2018

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Despite exploration budgets remaining at comparatively high levels in the past decades, geologists have only been able to find a fraction of the gold ounces they discovered in the preceding 18-year period, a new analysis conducted by S&P Global Market Intelligence shows.

The financial information and analytics firm said that despite exploration budgets having declined from the ten-year peak in 2012 to $54.3-billion in the past decade – almost 60% higher when compared with the $32.2-billion spent on gold exploration in the preceding 18 years – only 215.5-million ounces of gold has been defined in 41 discoveries over the most recent ten years, compared with 1.73-billion ounces found in 222 discoveries in the preceding 18 years.

“We have shown in previous research into lead times for gold assets, that it takes about 20 years for an asset to advance from discovery to production. This timeline implies that the reduced discovery rates of the last decade will limit the pool of projects that could come on line in 15 to 20 years,” S&P Global metals and mining senior research analyst Kevin Murphy says.

“Unless discovery rates begin an upswing in the near future, there could be a lack of quality assets available for development in the longer term. The declining discovery rate shows the importance of continuing exploration and funding companies responsible for exploration to maintain a healthy future pipeline of assets available for development.”

S&P cautioned that even after adjusting for more recently identified deposits that might eventually surpass the threshold for a major discovery, and for major discoveries with potential to expand, the gold in major discoveries might only increase to about 363-million ounces over the next decade – still only a fraction of that discovered in the prior 18-year period.

S&P pointed out that, despite the sharp decline reflecting the lack of new significant deposits being found, a portion of the shortfall is a natural situation in which the additional exploration required to expand the known endowment of recently found deposits beyond its major discovery threshold has not yet been conducted. S&P includes all deposits containing more than one-million ounces of gold in reserves and past production, or two-million ounces of gold in reserves, resources and past production.

Importantly, S&P pointed out that, of the 215.5-million ounces contained in the 41 discoveries made over the past decade, almost half, or 105.8-million ounces, is contained in the ten largest deposits – the biggest being Zhaojin Mining Industry's Haiyu gold project, in China's Shandong province, which holds an estimated 16.4-million ounces of yellow metal in reserves and resources.

Barrick Gold's Goldrush discovery, in Nevada, is the second largest in the last decade with 13.2-million ounces in reserves and resources.

Of the 263 major discoveries in the past 28 years, over half (139) were made in the 1990s and contain most of the discovered gold. The industry downturn that began in 1998 (and lasted into the early 2000s) had a meaningful impact on both budgets and discoveries, S&P Global states. By 2000, budgets were almost one-third of their 1997 peak, and discovery rates were declining, with only 16 new discoveries recorded from 2000 to 2002, containing 108.3-million ounces of gold – well below the average from any period during the 1990s.

While there is clearly a decline in discovered deposits and ounces, this will not impact the short-term project pipeline. S&P says there are many quality assets being developed that will come on line over the next several years, and far more in the pipeline that will be moving towards production within the next decade.

Unless discovery rates begin an upswing in the near future, there could be a lack of quality assets available for development in the longer term, Murphy cautions.

Edited by Creamer Media Reporter

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