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Drop in project financing raised by mining juniors in 2022 will affect exploration drilling in 2023 - report

Kitco News

(Kitco News) - According to S&P Global Market Intelligence (S&P), global exploration budgets rose 16% in 2022, following a 34% rebound in 2021.

S&P said that after budgets fell 10% yearly to $8.35 billion in 2020 due to the COVID-19 shock, nonferrous global exploration budgets hit a nine-year high of $13.01 billion in 2022.

“The increase was motivated by an escalating interest in the global energy transition as part of global decarbonization efforts and the ongoing pandemic recovery. High metal prices and healthy financing conditions supported it,” the authors of the report found.

S&P added that while allocations for most commodities increased in 2022, budgets for gold and copper posted the largest dollar increases, while energy transition efforts saw lithium increase to its highest total ever.

The consultancy said that despite the general focus on energy transition commodities over the past few years, “gold continues to be the primary target for global exploration budgets,” adding that allocations increased 12%, or $722 million, in 2022 to $6.92 billion, driven by increased junior budgets.

Importantly, S&P reported that copper exploration budgets increased 21% to $2.79 billion, a decade-high tally from 743 companies.

“Globally, copper budgets hit an important milestone in 2022, with minesite exploration receiving the largest allocation of any stage for the first time on record,” it said.

The consultancy also noted that with global energy transition efforts escalating over the past several years, prices have risen for many “green” metals; increased interest in lithium, especially, has driven significant market price gains.

“This has encouraged the exploration sector to greatly increase lithium spending, with allocations nearly doubling to $467 million in 2022 — the highest total since we started tracking lithium exploration separately in 2010,” the report reads.

However, S&P said that significant financings - valued at $2 million or more - raised by junior and intermediate companies fell 45% year over year in 2022 to $11.29 billion. The total including financings below $2 million was $12.18 billion.

“This was a major reversal of the 78% year-over-year increase in total funds raised in 2021, to $21.55 billion,” the consultancy pointed out.

S&P also noted a slowdown in drilling activity growth in 2022, which coincided with the increase in metals exploration budgets tempering to 16% in 2022 from a 34% surge in 2021.

With this in mind, S&P expects a reversal in the uptrend of exploration drilling in 2023.

“While 2022 was overall positive despite a slowdown in drilling’s growth, it also proved to be a challenging time for the industry in terms of project financing, with funds raised almost halving to $12.18 billion from $21.55 billion in 2021. Thus, we expect a reversal in the uptrend of exploration drilling in 2023,” it concluded.

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