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Asian Intelligence
Exploration budgets surge to all-time high
THE top challenge during 2011 among senior
mining executives is optimizing production effectiveness,
pushing the previous year’s primary
concern – ensuring workplace safety –
into second position, according to the Mincom
Mining Executive Insights: 2011 survey.
The study surveyed high-level executives at
256 mining companies in North America,
Latin America and the Asia Pacific region to
investigate their most pressing concerns, and
where they see opportunities for growth.
When asked to rank their top challenges by
level of urgency, respondents replied: Optimizing/maximizing
production effectiveness
(73%); ensuring workforce safety (53%); recruiting
and retaining a skilled workforce
(47%); managing capital projects (33%); ensuring
different departments work together
(33%); and ensuring equipment operates reliably
and predictably (32%).
Mincom’s executive vice president and
chief strategy officer Jennifer Tejada says,
“Overall, the attitude of the respondents is
positive, with 69% expressing optimism
about their general business outlook.
Not surprisingly, given the growing global
demand for mining products and high commodity
prices, maximizing production is by far
the number-one priority for global mining executives.
We see this trend among many of
Mincom’s mining customers as they work to
achieve productivity improvements, reduce
the impact of production bottlenecks, and
improve integration of processes across the
THE estimated total 2011 budget for nonferrous
metals exploration surged to an all-time
record of $18.2 billion, according to Metals
Economics Group’s (MEG) 22nd edition of
Corporate Exploration Strategies (CES). Despite
increased volatility recently, metals prices,
the primary driver of exploration
spending, remained relatively strong in 2011,
giving confidence to the industry and, as a result,
exploration budgets increased by $6.1
billion, up 50% from 2010. Nonferrous exploration
refers to expenditures related to precious
and base metals, diamonds, uranium
and some industrial minerals but it specifically
excludes iron ore, aluminium, coal, and oil
and gas. Including estimates for the budgets
MEG could not obtain, the 2011 worldwide
exploration budget totals $18.2 billion.
The CES study states that most countries
experienced increased exploration investment
in 2011, and explorers demonstrated a
higher tolerance for risk despite additional
concerns and uncertainty about security, policy,
and tenure in many countries. Of the 120
countries for which MEG documented exploration
spending by the industry, those commonly
perceived to be high risk accounted for
23% of the 2011 aggregate exploration total,
up from less than 16% in 2010. The study
says that the potential reward often increases
the industry’s appetite for risk during periods
of increased exploration spending, but exploration
in high-risk countries, particularly earlystage
work, is usually the first to be cut when
risk levels or uncertainty increases.
It says the proportion of overall exploration
spending dedicated to early-stage and generative
work has been fairly stable over the past
three years, however, at just a third of overall
allocations it is historically low. The decline in
grassroots’ share of spending over the past
decade correlates with the upward trend in
late-stage and mine site budgets, as companies
spent more on late-stage projects to move
them towards production or to make them attractive
for acquisition, and on mine site work
as a less expensive and less risky means of replacing
and adding reserves. However, the
number of large-scale assets advancing to development
has not risen proportionately with
this increased focus on late-stage projects,
contributing to constraints on meaningful production
increases for most metals.
The MEG indexed metals price represents a blend of the relative changes in a basket of metals prices weighted by
the percentage of exploration expenditures dedicated to each metal by the industry as reported in MEG’s CES studies.
Relative prices for 2011 are based on the average through September.
Optimizing production effectiveness is top challenge
mining value chain.”
When asked to rank their top three obstacles
to achieving organic growth, respondents
identified the following: Complying with
government regulations (40%); delays in getting
new mines operational (32%); difficulty in
standardizing business processes (22%); inability
to move quickly enough to exploit commodity
prices (21%); and inability to meet
planned production goals (21%).
“Mining companies face additional regulatory
scrutiny as they look to develop new
sites and increase production at existing
ones, leading respondents to once again
identify regulatory compliance as their primary
obstacle to organic growth,” says Jennifer
Tejada.
January/February 2012 | ASIA Miner | 5