Industry optimism for an improved 2020 was stymied by the COVID-19 pandemic, but a quicker-than-expected recovery bodes well for 2021

The global budget for nonferrous metals exploration decreased 11% to an estimated $8.7 billion in 2020 from $9.8 billion in 2019, according to the annual World Exploration Trends Report from S&P Global Market Intelligence, released in conjunction with the 2021 Prospectors & Developers Association of Canada (PDAC) International Convention. 

Exploration budgets decreased modestly in 2020, due primarily to travel restrictions and lockdowns in response to the COVID-19 pandemic. An acute decrease in metal prices in March 2020, stemming from expectations of reduced demand, further hindered exploration planning and efforts, particularly in the first half. S&P Global Market Intelligence's survey of 2,500 exploring companies in 2020 revealed that the global aggregate nonferrous budget decreased 10% to $8.3 billion year over year.

"The mining industry managed to navigate through market complexities and capitalize on rebounding prices and easing restrictions as 2020 progressed. The decline in the 2020 exploration budget was far less steep than initially anticipated at the end of the March quarter, when the global spread of COVID-19 was surging," said Mark Ferguson, Research Director at S&P Global Market Intelligence. "Although uncertainty remains, we are optimistic that exploration in 2021 will at a minimum reverse the pandemic-induced losses in 2020. Should metal prices continue to remain strong over the next several months, it is likely that the 2021 exploration budget will be even stronger, rising by 15%-20% year over year."

Among the commodities covered by the report, only gold and silver posted modest increases in exploration budgets year over year, while budgets declined for the industrial metals, led by copper, zinc, lithium and cobalt. The relatively flat gold budget year over year and the quick recovery in metals prices cushioned the exploration sector from the severe declines seen during the global financial crisis in 2008.

The report also highlighted that the industry's trend away from early-stage exploration to advanced- and near–mine- exploration became more pronounced in 2020 due to travel restrictions, which made large-scale field programs more difficult to execute.

“In the medium term, explorers may continue to opt for exploration programs focused on less risky brownfields assets, yet such efforts will only serve to exacerbate production pipeline challenges for various commodities,” added Kevin Murphy, Principal Analyst at S&P Global Market Intelligence.

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