Analysts expect activity in the exploration sector to crumble in 2020 as financings dry up and miners look to conserve capital amid falling industrial metal prices and in response to pandemic measures aimed at containing the coronavirus outbreak.

"Exploration is going to get hit pretty hard in 2020," S&P Global Market Intelligence mining analyst Kevin Murphy said. "We all know that when companies go into cash preservation mode, one of the first things that gets reduced is exploration."

The outlook for the sector remains uncertain as the coronavirus pandemic and its knock-on economic effects are still unfolding, but smaller explorers already look to be curtailing activity, in part because travel bans have made running fieldwork difficult.

Peter Megaw, MAG Silver Corp. co-founder and chief exploration officer, told Market Intelligence that travel bans were having a significant impact on fieldwork and noted that many geologists were diverting focus to desktop work.

"So in the [turning] life's lemons into lemonade department, I'm taking this as an opportunity to revisit data, rethink observations, catch up on the literature and generate some new exploration ideas to pursue when we can come out again," Megaw said.

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Murphy said Market Intelligence was working on revised 2020 exploration expectations, but it was clear that junior explorers will have a tough time raising cash to fund exploration programs during the crisis and that cash-flowing miners, especially in industrial metals such as copper, may look to slash operating costs. There are already some signs of mining companies muting expectations, dropping production guidance and cutting dividends in the face of pandemic-related uncertainty.

Smaller junior explorers will likely find it increasingly tough to source funds during the market turmoil with share prices down and investor appetite in financing opportunities shrinking, Murphy said. That will reduce the cash available for exploration.

Still, the price of gold has fared relatively well in 2020 as investors flock to it as a safe haven asset. Christopher Galbraith, a mining analyst with Market Intelligence, said the smaller explorers focused on gold may be the first to rebound as the crisis dissipates and investors return to the market. "I think we're going to see gold explorers react to that much faster," Galbraith said.

Gold producers may face increasing costs in 2020, although the outlook remains uncertain, Galbraith said. A slew of miners in the gold sector and beyond have cut back production in response to the pandemic. Lower production and mine shutdowns could pinch margins, according to Galbraith, who described it as a wait-and-see situation. Another uncertainty facing the mining sector is how currency weaknesses in some countries may give miners a boost along with lower prices for oil, which is a significant input for many mining operations.

Market Intelligence had forecast exploration activity to rebound slightly in 2020. Exploration budgets for nonferrous metals declined to US$9.8 billion in 2019 from US$10.1 billion in 2018.

While it may not provide much consolation for cash-strapped explorers unable to source funds in an increasingly tight financing market, the junior exploration sector is defined by boom and bust cycles, and in that sense, having to tighten wallets and curb fundraising and field activities is nothing new.

"We have already been working as a remote organization for the past decade with staff in different locations and meetings online. So this is familiar for us," said John-Mark Staude, president and CEO of Riverside Resources Inc., which runs joint venture exploration programs.

Exploration Insights mining analyst and investor Brent Cook echoed Megaw and noted that development-phase juniors such as those working on resource estimates or other technical studies may take the time away from the field to go back to the drawing board and refine assumptions.

"So the shutdown isn't that big a deal in the long run, and it might be positive in the long run. They'll get more time to think," Cook said.