| Drilling at one of Imdex's exploration testing facilities. Source: Imdex Ltd. |
Gold miner Agnico Eagle Mines Ltd. unseated Rio Tinto Group as the mining company with the biggest nonferrous exploration budget in 2022 amid an industrywide increase in spending on gold and battery metals, according to S&P Global Commodity Insights data, screening for the top 10 nonferrous exploration budgets of the year.
Companies devoted most of their budgets to less risky minesite exploration. Canada was a major recipient of exploration investment, while miners tended away from politically fraught Mexico. Lithium exploration budgets jumped 88%, the largest increase among metals analyzed by Commodity Insights. But analysts warned that a recent dip in metal prices foretells actual spending below budgets.
Diversified miner Rio Tinto has held the top spot every year since 2018, in large part driven by its strong grassroots exploration budgets, which are typically larger than its peers.
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But Agnico Eagle moved up the ranks on the back of its merger with Kirkland Lake Gold, which closed in February, bringing a stable of new mines and projects. Agnico Eagle's total estimated exploration budget for 2022 is $324 million, jumping from pre-merger exploration spending of $152.5 million in 2021. Meanwhile, Rio Tinto's nonferrous exploration budget shrank to $314.1 million in 2022 from $588 million in exploration spending in 2021.
Rounding out the top 10 exploration budgets in 2022 are Newmont Corp., Barrick Gold Corp., Anglo American PLC, AngloGold Ashanti Ltd., Vale SA, Fresnillo PLC, Osisko Mining Inc. and Kinross Gold Corp.
Minesite exploration over grassroots
Planned spending on minesite exploration dominated many of the top budgets, continuing an ongoing industry trend away from grassroots exploration.
"Minesite budgets remain near their all-time highs," said Commodity Insights analyst Kevin Murphy. "So we're still hyper-focused, not on purely generative programs, but accretive programs that add on to existing assets or life to mines."
The trend away from grassroots exploration comes as demand grows for energy-transition-related metals such as copper and lithium. The conundrum for miners is that early-stage exploration is a high-risk endeavor where spending does not easily bear fruit in terms of new discoveries, whereas minesite exploration often leads to new, more accessible ore at existing operations.
Still, exploration budgets are on the rise. Planned spending increased 16% year over year to $13.0 billion for 2022, according to an Oct. 18 report by Commodity Insights. Gold budgets climbed 12% to $6.92 billion, while copper budgets rose 21% to $2.80 billion. Budgets for nickel exploration, a major ingredient in batteries, jumped 45% to $612 million, and lithium exploration budgets rose 88% to $467 million.
Battery metals for all
Surging interest in energy transition metals was no surprise to analysts.
"Forward-facing metals such as lithium, copper and nickel are on every mining company's wish list," David Davidson, a base metal analyst at Paradigm Capital, said in an email. Paradigm Capital is an independent Canadian investment dealer.
Indeed, executives at mining companies with the top 10 budgets underscored base metals and battery metals including lithium as key targets for growth. Rio Tinto CEO Jakob Stausholm touted the company as well-positioned to invest in commodities crucial to the energy transition, saying on a July 27 earnings call that its expertise will "play a leading role in delivering vital commodities for a low-carbon future."
Rio Tinto agreed in late 2021 to acquire the Salar del Rincon lithium project in Argentina in an $825 million deal as it works to expand into the booming battery metal sector.
Likewise, Vale CEO Eduardo Bartolomeo said on a July 29 earnings call that "there's a huge amount of opportunities" in the energy transition and noted Vale would never let go of its base metals business, which it has increasingly highlighted as a key division.
Though exploration budgets are stronger in 2022, Murphy warned there could be cuts to actual exploration plans by the end of the year amid pullbacks in some metal prices, such as copper, which is driving industry bearishness.
"Actual spending ... is probably going to be lower," Murphy said.
Exploring Canada
The top destination for nonferrous exploration budgets was Canada with $2.68 billion in planned spending, up 29% year over year. Australia and the U.S. followed with exploration budgets of $2.32 billion and $1.60 billion, respectively, up 22% and 25% compared to 2021.
Russian exploration budgets dropped 32% to $359.4 million following its invasion of Ukraine, which has isolated it economically from countries such as the U.S. and Canada. Canadian gold miner Kinross, which had the 10th-highest exploration budget in 2022, exited Russia in the wake of the invasion, selling assets at a steep discount.
Against the backdrop of strong increases in overall exploration budgets for this year, Mexico stood out as an underperformer with growth of just 2%. Murphy pointed to government policies, such as Mexico's nationalization of lithium assets, as a drag on activity.
"The industry in general took notice and said, 'Oh, hold on. Let's see where this is going,'" Murphy said.
S&P Global Market Intelligence sometimes estimates all or part of a company's budget breakdown when the company is unable or unwilling to provide it. These estimates are based on conversations with company representatives, published sources and information gathered from joint venture partners.
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