Mining firms to spend $11bn on exploration

Mining firms to spend $11bn on exploration

MINERS and investors are poring over satellite images, tracking drilling rigs and quizzing company executives for clues on whether the sector’s heavyweights are close to a new jackpot discovery.
As Rio Tinto Group searches Australia’s Great Sandy Desert for copper and Anglo American scours a 19 000-square kilometre package of land in Brazil, they’re among the mining giants stoking excitement over potential reserves that’ll replenish project pipelines and overturn the industry’s lack of recent success in unearthing deposits.
It’s part of a broader global push across the industry that’s driving a revival in exploration spending on key metals, forecast to top $11 billion after hitting a low of about $9 billion in 2016, according to Melbourne-based MinEx Consulting Ltd.
To keep tabs on progress, investors last month pressed Anglo’s chief executive Mark Cutifani for details on his company’s campaign, while others are monitoring traffic shuttling in and out of Rio’s expanding project in the Paterson district in Western Australia, and consulting satellite imagery of the region in an attempt to deduce the scale of the company’s activities.
“We have some very interesting targets, but we never say too much about exploration ― I don’t want my peers to know what I’m doing,” Rio’s CEO Jean-Sebastien Jacques said in an interview last week. “Though they are looking very carefully, and using even satellite images to try to see what we’re doing.”
Australia’s top gold producer, Newcrest Mining, and iron ore exporter Fortescue Metals Group, are among others who have joined the quest for untapped gold and copper in the Paterson region.
The area “is almost untouched from an exploration point of view, because it’s under some sand cover,” raising hopes for major discoveries, said Lynda Burnett, managing director of Sipa Resources, which is exploring about 10 kilometres away from Rio’s camp, and has watched its larger neighbour’s operation swell.
“Hopefully Rio might be able to tell us more soon ― we’ll just have to be patient.”
The recent upturn in exploration is also reviving partnerships between the industry’s heavyweights and smaller, specialist companies, a strategy that “came to a screaming halt” at the start of the decade after the global financial crisis, according to Burnett, previously an exploration executive with Newmont Mining Corp.
Small investments in exploration carry less risk than acquisitions with big price tags, and in the case of copper ― where deals have proven hard to find ― offer an alternative route to growth, according to Camille Simeon, an investment manager at Aberdeen Standard Investments, which holds Rio and BHP shares.
“It can be a sensible approach, rather than buying something.”
South32 has been among companies to lead the way on striking new pacts, Burnett said. It has made investments, or joint-venture agreements, with about six companies that have given it an interest in almost 20 prospects from Alaska to Peru, according to a May presentation.
In June, the producer agreed a $1,3 billion deal to acquire one of the partners, Arizona Mining.
“This approach has given us diversity of options and a cost efficiency that is hard to beat,” South32’s head of corporate development Simon Collins said in an emailed statement.
Rio also has forged a raft of alliances in recent months, looking for copper and gold in Serbia and joining projects in the Paterson province with Alloy Resources and Antipa Minerals. Newcrest has widened its exploration work to take in eight countries. ― Bloomberg