(Originally published in Mining Engineering, v. 52, no. 5, May 2000, p. 38-48.)
This summary of international nonfuel mineral exploration activities for 1999 draws upon available data from literature, industry, and U.S. Geological Survey (USGS) specialists. The report documents data on exploration budgets by region and commodity, identifies significant mineral discoveries and exploration target areas, discusses government programs affecting the mineral exploration industry, and presents inferences and observations on mineral industry direction based upon these data and discussions.
Statistical Interpretation of International Mineral Exploration for 1999
Two types of information are reported and analyzed in this annual review of international exploration for 1999: 1) budgetary statistics provided by Metals Economics Group1 (MEG), and 2) information on regional and site-specific exploration activities in 1999 compiled by the USGS. The MEG information summarizes 1999 company budgets for exploration targets worldwide, primarily for precious and base metals. MEG includes information on other mineral targets where it is available. USGS compilations described here cover nonfuel minerals, but focus of this article is primarily on precious and base metals and diamond. Analyses are based on information provided by USGS mineral commodity, country, and mineral-resource specialists, as well as industry contacts and trade journals.
The MEG report provides information on planned exploration budgets for selected companies for 1999; however, it does not report figures reflecting actual exploration expenditures. MEG estimates that their survey results cover 80 percent of 1999 world exploration budgets. Data are not included for companies with budgets of less than US$2.9 million, for those which chose not to participate in the MEG study, for private companies which do not publish figures, and for government-funded exploration activities.
Care should be taken when performing temporal interpretations of these data, such as trend analyses, because the number of mining companies surveyed by MEG varies with time and companies included in the survey change on a year-to-year basis. Data from 1999 are particularly influenced by a lower number of exploration companies supplying data, a reflection of the large amount of corporate restructuring that began toward the end of 1997 and continued in 1998 and 1999 (The J B Were Junior Miners Review, J B Were & Son, March 1998, p. 4).
The total 1999 commercial international exploration budget for nonfuel mineral targets (MEG excludes iron ore) was estimated by MEG to be $2.7 billion, 23 percent lower than the corresponding budget for 1998. For the 132 companies canvassed by MEG in their 1999 study, the total amount budgeted for 1999 international exploration was $2.17 billion (50 percent for gold, 37 percent for base metals, 10.5 percent for diamond, and 2.5 percent for other minerals). Figure 1 shows the 1999 planned worldwide exploration budgets by region.
MEG “regions” reflect a mixture of individual countries, continents, and other groupings, but they are reported consistently on an annual basis and provide a means of indicating the flow of budgeted exploration expenditures from year to year. Regional allocations based on data from companies canvassed by MEG for 1999 were: Latin America, $630 million; Australia, $404 million; Africa, $323 million; Canada, $234 million; the United States, $216 million; the Pacific region, $175 million; and the rest of the world, $182 million.
MEG data indicate that planned exploration budgets (in current dollars) for 1999 decreased from 1998 levels in all regions. This decrease may be a result of continued low commodity prices, investor wariness for funding exploration activities, and tighter company budgets. Lingering uneasiness resulting from financial turmoil in East Asia and Southeast Asia may also contribute to the decline in exploration activity [USGS Mineral Commodity Summaries 2000 (MCS 2000), p. 5]. The decrease continues a downward trend first noted in 1998, and marks a departure from the 1993 to 1997 trend of increases reported by MEG. Figure 2 summarizes MEG exploration budget data for the period 1993 to 1999, in terms of both regional dollar allocations and regional percentage of the total exploration budget. The largest budget dollar reduction between 1998 and 1999 of $184 million took place in Latin America, followed by a $171 million reduction for Africa. Budget estimates for exploration decreased 34.6 percent in the African region, and 34 percent in the Pacific region; other regional percentage decreases ranged from 24 percent to 11 percent. In spite of the significant decrease reported for Latin America, it remained the region with the highest exploration budget. In relative terms, Australia, Latin America, and the United States appear to show slight increases in their percentage of world exploration budget, mainly due to larger decreases for other regions.
Although there is good reason to believe that a substantial reduction in budgeted exploration spending took place between 1997 and 1999, MEG survey data showed a corresponding drop in surveyed companies reported for 1998 and 1999. Whereas MEG reported an increased level of coverage (estimated at 71 percent for 1993, 81 percent for 1998, 80 percent for 1999), it reported a drop in companies responding to its survey. This would be true if the reduction in survey respondents reflects a corresponding reduction in companies exploring during 1998 and 1999. Available data suggest that market conditions forced the industry to consolidate, and a number of company mergers, takeovers, and failures were reported to have taken place during this period (The J B Were Junior Miners Review, J B Were & Son, March 1998, p. 4).
The decline of metal prices continued into 1999, causing some exploration companies to curtail efforts or rethink future plans. Table 1 shows the change in price of selected precious and base metals for 1994 to 1999. Recent MEG data continue to support the conclusion that 1997 was the “high water mark” for exploration spending for the 1990s.
Table 1. Prices for selected base and precious metals, 1994 to 1999
Average price for specified year
1USGS Metal Prices in the United States Through 1998, August 1999.
2Estimate of USGS Mineral Commodity Summaries 2000, Accessed March 9, 2000 at URL http://minerals.usgs.gov/minerals/pubs/mcs/2000/mcs2000.pdf.
3U.S. producer cathode (99.99%-pure copper), in Platt’s Metals Week, dollars per pound.
4Englehard Corp., published in Platt’s Metals Week, dollars per troy ounce.
5North American producer price, delivered (Minimum 99.97% pure), in Platt’s Metals Week, dollars per pound.
6London Metal Exchange cash price for primary nickel (Minimum 99.80% pure), in Platt’s Metals Week, dollars per pound.
7New York price (99.9%-pure silver), Platt’s Metals Week, dollars per troy ounce.
8U.S. Dealers Special High Grade zinc (99.99% pure) delivered price, in Platt’s Metals Week, dollars per pound.
Although gold remained the principal exploration target in 1999 (figure 3), the amount budgeted for gold exploration ($1.08 billion) is 31 percent lower in nominal terms than that budgeted for gold in 1998 and 59 percent lower than the record 1997 budget for gold exploration. This decrease reflects low gold prices, which have declined steadily since 1996 (table 1) and investor wariness for funding gold exploration activities while gold remains at a low price level. Gold sales by central banks, forward sales by producers, and market competition have tended to depress gold prices during 1999.
Exploration budgets for base-metal projects dropped from $934 million in 1998 to $801 million in 1999 due to the general decrease in exploration funding. Base metals accounted for 37 percent of the total MEG world exploration budget, compared to 33 percent in 1998 and 27 percent in 1997. In times of a low gold price, exploration companies tended to favor the search for polymetallic deposits. The average 1999 gold price (table 1) was lower than its corresponding price in 1998, although the gold price appeared to be climbing slightly towards the end of the year. Most 1999 base-metal prices remained close to 1998 levels except for nickel, which exceeded the average 1998 price by 30 percent. Copper exploration constituted about 57.5 percent of the base-metals exploration budget; zinc and nickel each represented about 20 percent of the base-metals total. Budgeted exploration expenditures for base metals were greatest in Latin America, Australia, and Canada.
Exploration budgets for mineral targets other than gold and base metals also decreased in 1999 to $282 million, but their percentage of the exploration budget total increased to 13 percent, compared to 11.9 percent for 1998. Diamond exploration accounted for about 81 percent of this amount, or about 10.5 percent of the total worldwide exploration budget reported by MEG for 1999. Continued interest in diamond exploration can be tied to ongoing funding by DeBeers, increased funding by Rio Tinto at its Canadian diamond projects, and the success of some junior companies to secure funding for diamond exploration in times of low metals prices.
Interpretation of Domestic Mineral Exploration in 1999
Exploration activities in the United States continued an apparent decline with an 11 percent reduction in total budgeted exploration expenditures in 1999. The U.S. exploration budget fell to $216 million, but was the smallest regional percent change reported by MEG. The U.S. percent share of world minerals exploration apparently rose to about 10 percent in 1999. Although the United States experienced a decline in minerals exploration for the same reasons as the rest of the world, its healthy economy (reflecting strong economic growth and low inflation rates) likely mitigated the effect of the decline in domestic exploration activity on the economy during 1999.
The United States (excluding Alaska) is a relatively mature exploration province, generally requiring deep (more expensive) drilling. Stringent permitting standards also add to the cost of exploration. In spite of these higher costs, a recent survey of 88 junior exploration companies and 23 senior exploration companies conducted by the Fraser Institute of Canada suggests that the United States continues to attract interest in minerals exploration. Interest in minerals exploration varies substantially based on location and State regulatory policies (Fraser Institute, 1999 (http://www.fraserinstitute.ca/). Nevada was included in the five top-rated regions in North America for its policy climate, but California, Wisconsin, Montana, Washington, and Colorado received the lowest ratings of evaluated regions in this category. Nevada and Alaska were included in the five top-rated regions for attractiveness based on geology, while Maine, Missouri, Texas, Minnesota, Michigan, and Wisconsin were rated as the lowest for this category. Survey results suggest that senior mining companies spent most of their exploration budgets outside of North America, although junior companies still favor the region. It appears that during this period of low market prices, the necessity for some exploration companies to contain costs has led them to shift their exploration focus away from areas where environmental costs may be significant or exploration more expensive, in spite of favorable policy climate or geology.
USGS data suggest Alaska and Nevada had the greatest amount of exploration activity of U.S. States during 1999, primarily for gold, base metals, and platinum-group metals. Interest in Alaska has been attributed to the higher probability of occurrence of undiscovered mineral resources and the cooperative relationship that generally exists between industry and the State (Mining Journal, November 6, 1998, p. 363). Estimated exploration expenditures throughout Alaska in 1999 were $48 million, down from the $57 million invested in 1998 (Swainbank and Szumigala, 1999). Sixty-nine percent of exploration expenditures were to be spent in the eastern interior region of Alaska. Stimulated by the Pogo gold discovery of 1998, the Goodpaster mining district was the hub of 1999 exploration activity.
The low commodity prices of the 1998-1999 period led exploration companies to follow various paths to ensure the availability of future resources. Some exploration companies have redirected U.S. exploration efforts to search for higher-grade gold targets similar to the Ken Snyder deposit in Nevada, characterized by multiple high-grade vein structures at depth capped by a low-grade disseminated near-surface mass (Northern Miner, January 4, 1999, p. 3). Other companies continue their focus in searching for large-tonnage, low-grade deposits which benefit from recent improvements in heap leaching, bulk mining, and carbon technologies. Some companies such as Echo Bay Mines are restricting exploration to areas adjacent to known mining areas or developing mines (Northern Miner, September 6, 1999, p. 12). Billiton Plc. announced plans to cut back on in-house exploration and rely on small, independent exploration companies under contract to the company (Billiton Plc. press release, April 22, 1999).
The search for deposits at considerable depth or offshore has been made easier by recent technological advances in drilling and geophysical detection. This has resulted in continued deep drilling for underground extensions of known gold occurrences on major producing trends, such as the Carlin Trend of Nevada. In 1998, 20 percent of Nevada’s gold production came from underground mining operations, up significantly from previous levels. The Gold Institute estimates that by the year 2000, one-third of U.S. gold production will come from underground mines.
Analysis of Exploration Activity
Political, environmental, and geologic factors suggest reasons for the trend in exploration activity (1993 - 1997) away from Australia, Canada, and the United States (highly industrialized areas with extensive past mineral exploration) toward Africa, Latin America, the Pacific, and other regions (largely developing regions with under-explored areas). Figure 4 shows this trend in terms of percentage of planned exploration budgets. During the 1998-1999 period, budgeted expenditure estimates based on MEG data for “developing” countries decreased in terms of world percentage while corresponding exploration budgets for “industrialized” increased slightly. Low commodity prices, regional unrest (central Africa), financial turmoil (Asia-Pacific), and post-Busang investor trauma all seemed to focus investor interest towards areas with established mineral potential and away from areas with more potential “risk”. Whether this reflects a change in long-term trends or is a short-term aberration to those trends remains to be seen.
Information on approximately 1100 exploration targets in 1999 was gathered from USGS mineral commodity, country, and mineral-resource specialists; industry contacts; and trade journals. Regional distribution of these exploration targets is represented in figure 5, based on the number of projects reported for each region. When compared to similar data for 1998, exploration activity appears to have increased in the United States and Australia, while exploration activity in Africa and the Pacific region appears to have decreased.
The number of sites having exploration activity within a country or region does not always correspond to the amount budgeted for exploration. Australia, which ranks second in terms of dollars budgeted but sixth regionally in terms of number of project sites, illustrates a region where a significant amount of exploration activity is related to advanced exploration; budgets for advanced projects are generally higher as companies expend higher amounts per site for feasibility and pre-development work. Canada, on the other hand, represents a region where numerous junior companies are exploring, but few sites as yet warrant large capital expenditures. Junior companies spending less than $2.9 million for exploration were not included in the MEG budget estimates, but the USGS site data include sites being explored by junior companies. Canada ranks first in terms of number of sites being explored, but ranks fourth in terms of total dollars budgeted. The United States is another area where there is continued exploration activity by junior exploration companies investing comparatively low levels of exploration dollars per company.
Using the available information, 100 exploration sites considered most noteworthy in 1999 were selected for table 2. Selection was based on the following criteria:
The high level of exploration activity at the site, determined either by level of drilling activity or exploration investment;
The large amount of resources delineated; and
The high potential for near-term development, based upon reported tonnage and grade estimates.
Each of these sites represents a new or recent discovery, delineation of a new ore zone, or a significant increase in resources reported in 1999. Sites undergoing preproduction development or currently producing were excluded from this list, unless significant reserves/resources were delineated in 1999 by exploration activity.
As shown by table 2, gold continues to dominate the list of reported exploration activities in 1999. Of the 100 selected sites reported in table 2, there are 59 gold, 10 zinc, 8 silver, 7 copper, 5 diamond, 4 nickel, and 7 other commodity targets. Categorization by commodity was based on consideration of the value of the contained resources at each target. Gold remained the most sought after mineral commodity in 1999. Interest in base metal deposits remained strong, but there seemed to be a shift from copper to zinc as the primary target mineral. Copper prices remained low in 1999, while other base metal prices held constant or increased slightly during 1999. These data are consistent with the findings of MEG for 1999.
Estimates of resources reported in table 2 reflect various stages of verification, different methodologies, and multiple sources of information. However, should these resources be verified, they would add over 250 million ounces of gold, 2.3 billion ounces of silver, 66 million tons of copper, 25 million tons of zinc, and 4 million tons of nickel to the world’s identified resources for these commodities. The USGS reports a 2000 world reserve base of 72,000 tons (2.3 billion ounces) of gold, 420,000 tons (14 billion ounces) of silver, 650 million tons of copper, 430 million tons of zinc, and 140 million tons of nickel (MCS 2000).
Table 3 reports the number of major exploration sites by region for the period 1995 to 1999, based on the criteria used to develop Table 2 of this report. Data for 1999 is drawn from Table 2, data for the years 1995 to 1998 were compiled from past work of the author using similar criteria (Mining Engineering, May, 1996-1999). In terms of the major sites considered, there appears to be a decrease in noteworthy exploration projects in Africa during 1999, with a corresponding increase in Australian and United States exploration projects. The political and social unrest in Africa likely restricted exploration activities there in 1999.
Table 3. Major exploration sites1 by region, 1995 to 1999
1Based on data developed by the USGS and appearing in the Annual Review (May) issues of Mining Engineering for 1996 to 2000.
2Including Central America, Mexico, and South America.
3Including Southeast Asia and islands in the Pacific Ocean.
4Including Asia, Europe, and the former Soviet Union.
Regional Exploration Activities
The level of exploration activity can often be linked with significant international events that can have regional impact. While the regional groupings used in analyses of exploration activities reflect a mixture of individual countries, continents, and other groupings, they have been used consistently for the last six years of this report and provide a means of tracking changes in budgeted exploration expenditures from year to year.
Latin America. Although Latin America continued to have the greatest amount of budgeted exploration dollars, it incurred the largest regional decrease in 1999, based on MEG data. Although the Asian crisis of 1997 had less severe ramifications on Latin America than some predicted, it reduced investor interest in emerging markets, particularly among European and North American investors (Mining Journal, October 22, 1999, p.1). This interest was further weakened by the low prices for many metals that continued into 1999. In spite of the general decline in regional interest, an annual survey of executives from leading international mining companies (Mining Journal, October 22, 1999, p.1) ranked the Latin American countries of Chile, Peru, Brazil, and Argentina at the top of its emerging country rating for exploration investment based on their financial attractiveness for investment. Investment appeal is reportedly based on the geologic potential, property value, ease of doing business, and political stability of these countries.
Interest in the region has recently been buoyed by the discovery and subsequent development of important deposits such as the Yanacocha and the Pierina gold deposits in Peru and the Collahuasi copper deposit in Chile. Sizable increases of reserves associated with the Veladero gold and the Agua Rica copper-gold deposits in Argentina, the Antamina base-metals property in Peru, and the Aldebaran gold-copper property in Chile has provided incentive for continued exploration in Latin America. A second factor for widespread interest in this region is the entrance of AngloGold into South America. In 1999, AngloGold acquired Minorco’s gold assets in Brazil, Argentina, and Venezuela and announced joint venture agreements which would extend its exploration activities into Peru and Ecuador.
Exploration in Latin America continued throughout 1999 at levels below both 1997 and 1998. Countries with the greatest exploration activity, in descending order by exploration activity, included Argentina, Mexico, Peru, Chile, and Brazil. Gold attracted about 67 percent of total exploration activity, but interest in base metals reached 18 percent and silver achieved about 9 percent of the total. Investment in 1999 was primarily used to further define newly discovered resources.
With a growing economy, Argentina expected a total investment in the mining sector of $3.3 billion between 1997 and 2000, all from private sources (MCS 2000, p. 14). About 25 percent of this overall amount is expected to be allotted for exploration. The Veladero discovery has revived interest in the Argentinean Andes as an area for exploration. A handful of Canadian and Australian junior companies continue to explore in Argentina, attracted by its relatively stable economy and mining code reforms. Other companies chose to surrender their land holdings.
Despite low metals prices, Mexico’s mining sector continued to attract a significant portion of Latin America’s foreign investment. As 1999 began, 444 foreign companies were exploring in Mexico, up from 372 the previous year (MCS 2000, p. 14). Mexico’s commitment to privatization continued during 1999, releasing additional land for exploration. Investment in the mining sector was about $1.4 billion. According to the Fraser Institute (cited earlier), about 3 percent of the 1998 exploration budgets from surveyed senior mining companies and 9.4 percent from junior mining companies was allocated for Mexico.
Recent regulatory reforms in Peru triggered a dramatic diversification into copper and gold from the silver-lead-zinc mines typically exploited in the past (Northern Miner, April 26. 1999, p. B1). Also, privatization agreements often require significant future exploration or investment. According to the Fraser Institute, about 78 percent of mining companies surveyed in 1999 planned an increase in budget for Peruvian exploration.
Australia. Australia was able to maintain the second largest regional exploration budget in 1999 for the seventh consecutive year, although the Australian Bureau of Agricultural and Resource Economics (ABARE) forecasted an end to the seven-year investment boom in the minerals and energy sector (E&MJ, May 1999, p. 10). Australia’s mining companies spent 60 percent of their exploration budgets within the country. Although overall exploration spending was expected to decline in 1999, Australian budgets increased from 17.5 percent of the world budget in 1998 to 18.7 percent in 1999, reflecting a favorable exploration environment. Effects of the 1997 Asian crisis continued however, as much of Australia’s resource production is exported to Asian destinations such as Japan, South Korea, and China (Western Australia Department of Minerals and Energy, 1999).
The greatest amount of budgeted exploration expenditures were allocated for Western Australia, principally for gold and nickel. According to the Australian Bureau of Statistics, gold accounted for 63 percent of Western Australia’s mineral exploration expenditure of A$523 million in 1998-99. Base-metal targets accounted for approximately 17 percent of reported Western Australian exploration expenditures in 1999. Most of this expenditure was on nickel prospects; copper-lead-zinc exploration was reported to be stagnant or declining. Exploration for iron ore increased by 33 percent to A$40 million, diamond exploration totaled A$33 million, and heavy mineral sands exploration expenditures for 1998-99 were reported at about A$9 million. Significant exploration activity in 1999 also occurred in New South Wales and South Australia (Western Australia Department of Minerals and Energy, 1999).
Access to land continued to be the predominant issue affecting mineral exploration and development in Australia in 1999. Native title claims (those of indigenous people groups) have delayed the granting of exploration titles across Australia. Of the 3970 mineral title applications received between July 1998 and September 1999, 393 agreements have been finalized. In Western Australia, there has been a 45 percent drop in the number of native title claims submitted over the past year (Western Australia Department of Minerals and Energy, 1999). Lower commodity prices contributed to the exploration decline from record 1996-97 levels. The decline is particularly significant for “greenfield” exploration.
Africa. As indicated in figure 2, Africa accounted for the largest decline in budgeted exploration expenditure from $663 million (17.4 percent of world budget) in 1998 to $494 million (14.9 percent) in 1999. Reasons for the decline include weak commodity prices, delayed implementation of policy reforms, and increased political instability (Mining Magazine, May 1999, p. RSA1). Renewed outbreaks of civil war seriously interrupted mineral exploration and development in Angola, the Republic of the Congo, and the Democratic Republic of the Congo. The war in the Congo drew other participants such as Burundi, the Central African Republic, Kenya, Namibia, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe, all of which sustained negative impacts on their own economies. Other conflicts or struggles plague Eritrea/Ethopia, Guinea-Bissau, Liberia, Sierra Leone, Somalia, and Sudan, discouraging investment in those countries (MCS 2000, p. 12).
African countries experiencing the highest levels of exploration activity in 1999, in descending order by exploration activity based on site data collected for this annual review, were Ghana, South Africa, Burkina Faso, and Mali. Four African countries (South Africa, Ghana, Tanzania, and Namibia) were listed in Mining Journal’s “Top 10 Emerging Markets” survey for 1999. Gold accounted for approximately 69 percent of the reported African exploration projects and diamond accounted for about 23 percent. Exploration for gold concentrated on the sub-Saharan African countries of Burkina Faso, Ghana, Guinea, Liberia, Mali, Tanzania, and Zimbabwe. Most diamond exploration and development focused on the southern African countries of Botswana, Mauritania, Namibia, and South Africa. Mining, and to a lesser extent, exploration for gold continued in Ghana, hampered occasionally by power outage problems which are slowly being resolved by the addition of gas-fueled thermal power to the national grid, much of which is targeted for the mining industry. Exploration was stimulated by the apparent success of new operations, notably Bibiani, Damang, Tarkwa, Wassa, and Geita. In South Africa, corporate restructuring continued, and AngloGold Ltd. entered into joint venture to develop the African gold prospects of Barrick Gold Corporation by spending up to $15.6 million in exploration. Offshore diamond exploration and development in Namibia is boosting a mining sector that has declined in recent years.
Canada. Preliminary statistics released by the Canadian Government (Natural Resources Canada, fact sheet, December 1999) reported forecasted 1999 exploration spending at C$488.6 million, almost half of the reported exploration expenditure for 1996. According to MEG data, budgeted exploration spending in Canada for 1999 decreased to US$234 million in 1998, with little change in its share of overall worldwide percentage of 10.8 percent. The difference can probably be accounted for by looking at the distribution of spending levels between senior and junior exploration companies and the number of companies surveyed. According to the Government survey, junior exploration companies accounted for about 35 percent of the total Canadian exploration budget. If the exploration budgets of those companies that reported exploration budgets in 1999 of less than US$2.9 million, the minimum cutoff for the MEG survey, were added to the budgets of MEG survey respondents, it is likely the total amount budgeted would be close to the Canadian Government figure estimated for 1999. The Fraser Institute reported that about twice as many companies projected a decrease in exploration spending in Canada as those projecting an increase.
Gold targets accounted for approximately 39 percent of the reported Canadian exploration activity; the greatest amount of activity occurred in Northwest Territories, Ontario, and British Columbia. Base metals accounted for about 37 percent (of which about 39 percent were for copper targets, 38 percent were for lead/zinc targets, and 17 percent were for nickel targets). Base metals activity took place in the newly created territory of Nunavut, and in Newfoundland, Ontario, and Quebec. Diamond accounted for about 29 percent of all exploration targets in 1999. Exploration expenditures for grassroots exploration in 1999 were projected by the Canadian Government to be about $106.3 million; advanced exploration was estimated at about $382.3 million.
Canada’s first diamond mine, the Ekati Mine in the Lac de Gras area of the Northwest Territories was projected to increase production to account for about 5 percent of world output in 1999, encouraging increased regional diamond exploration. Exploration increased resource estimates for the nearby Diavik diamond field, but all developmental activities at the site were suspended in late 1999 as the result of a decision by the Canadian Government not to issue an interim land-use permit. Development of the Voisey’s Bay nickel-copper deposit in Newfoundland has been delayed indefinitely in the midst of controversies over political, technical, and environmental directives (MCS 2000, p. 14).
United States. Exploration interest in the United States for gold has been centered in Alaska and Nevada. Most activity was centered around active mining areas or historic mining districts. While gold was the principal target for 74 percent of the reported exploration sites, the United States has had an increase in exploration for platinum group and base metals. In 1999, data on 140 U.S. exploration projects were collected and reviewed by the USGS; 53 percent were located in Alaska and 26 percent were in Nevada. Of those considered, 70 projects were not in the 1998 review (i.e., they are new or data were not available in 1998). The 1998 study considered 141 U.S. exploration projects; one of these advanced to the development stage in 1999 and two initiated production. About 80 percent of the 1999 projects were actively being explored, and had not reached full feasibility stage.
In spite of much downsizing of activities, several prominent exploration projects continued in the United States. In Alaska, continued drilling at the Pogo joint venture between Teck Corporation and Sumitomo of Japan defined additional gold resources. Battle Mountain Gold Corporation added more than 1.5 million ounces of gold to reserves of the Phoenix zone at the Battle Mountain complex in Nevada. PolyMet Mining Corp. began development of its NorthMet base metals and platinum group metals property in Minnesota, while in Nevada Franco-Nevada’s Ken Snyder gold mine and Barrick Gold’s Trenton Canyon Mine began production.
Pacific Region. The financial crisis that began in the Pacific region and Southeast Asia in 1997 continued through 1999. Budgeted exploration spending in the region as reported by MEG had decreased from a 1997 high of $440 million to $175 million in 1999. Reduced investor confidence, perceived problems with government policy, and unrest in the region caused a large number of junior companies, as well as some majors, to discontinue or reduce exploration activities in the region.
Exploration interest was greatest in Indonesia, the Philippines, and Papua New Guinea, mostly in established or developing mining areas. Gold accounted for about half of all exploration interest in the Pacific region. Base metals accounted for 37 percent of the reported activity in 1999. Drilling increased estimates of nickel resources at Halmahera in Indonesia, gold resources at Lihir in Papua New Guinea, and precious metals at Rapu Rapu in the Philippines. Further definition drilling occurred in the Grasberg area of Indonesia for copper-gold resources.
Rest of the World. Exploration budgets for the rest of the world (including Europe, Asia, and the former Soviet Union) decreased by a relatively modest $28 million in the MEG 1999 survey, but increased to about 8.4 percent of world share on a percentage basis. In Western Europe, mineral-resource exploration has been encouraged by up-to-date mining legislation, deregulation, and tax relief. The trend in mineral exploration in Western Europe continued to be for copper, gold, lead, and zinc, as well as diamonds in Scandinavia (MCS 2000, p. 13). After an economic winnowing process subsequent to the collapse of the former Soviet Union (FSU), industries that have survived have been increasingly able to attract foreign investment. Foreign investment in Central Europe has centered on industrial minerals and base metals. Political instability remained a major obstacle to foreign minerals investment. Successor states of the former Soviet Union and Eastern European countries continued to develop their market economy structures. The continued Russian financial crisis dominated economic developments in the FSU in 1999. Interest in minerals exploration in China increased as economic reform and social development plans progressed during 1999. In addition to China, interest was highest, based on activity, in Portugal, Romania, Yemen, and Greece. Gold and base metals were primary targets, but interest in diamond and platinum-group metals continued.
Over the past 20 years, more countries have opened their doors to private sector mineral exploration. Reasons for this expansion are numerous. The collapse of the former Soviet Union and the restructuring of Eastern Europe have led to increased land access for mining companies. Some governments have revised their mining laws or are in the process of doing so, using incentives including privatization, trade alliances, regulatory reforms, foreign investment provisions, and tax relief. Environmental issues have increased both the cost and risks of mining in many areas. However, the World Bank and other financial institutions have extended their programs to support project finance in emerging countries (Mining Journal, October 22, 1999, p. 2). In 1999, regional strife and economic turmoil have subdued some mineral development efforts in the face of more immediate concerns. Low commodity prices, continued economic concerns, and increased risk in some areas have further reduced investment for exploration.
Civil wars and border conflicts continued to destabilize a number of African countries, significantly increasing political risks and constraining investment in mineral exploration and development. Conflicts in Angola and Sierra Leone earned the title “diamond wars” as revenues from illegal diamond mining supported the war efforts. The United Nations imposed sanctions in June 1999, including a diamond embargo against Angola. This led De Beers to close its office in Angola and cease illicit Angolan diamond purchases. In spite of ongoing conflict, efforts to revise mining legislation were underway in Cameroon, Central African Republic, Congo-Kinshasa, Guinea Bissau, Namibia, South Africa, and Tanzania.
In South Africa, a Minerals & Mining policy paper issued in October 1998 has the potential to lead to the first major post-apartheid change in mineral policy (MCS 1999, p. 12). It would allow vesting mineral rights in the State and introduces policies designed to free up unused mineral rights, which would be made available to new foreign investors or new local black economic empowerment groups. South African investment abroad has accelerated as many mining houses have relocated or have listed on foreign stock exchanges. The South African Code for Reporting of Mineral Resources and Mineral Reserves has now been completed and formally recognized by the Johannesburg Stock Exchange.
In Ghana, development continued that will add over 755 megawatts of gas-fueled thermal power to the national grid, of which about 30 percent will directly benefit the mining industry. Mozambique’s hydroelectric and natural gas resources are also being used as a catalyst to increase industrialization and mining exploration.
The Australian Government announced approval of business taxation reforms to be implemented beginning in October 1999 over a two-year period. Reforms include cuts in corporate and capital gains rates, termination of a foreign venture capital tax, tax relief for share swap takeovers and tougher anti-avoidance measures (Mining Journal, October 1, 1999, p. 256). Native title continues to be the dominant issue affecting exploration and mining, claims are currently being tested in the courts. Mineral project development has been delayed over this issue. The Environmental Protection and Biodiversity Conservation Bill, passed by the Australian Parliament in June 1999, is designed to streamline the environmental approval process.
In an effort to promote mineral development in the new Canadian territory of Nunavut, a Memorandum of Agreement was signed in September 1999 to coordinate geoscience information collection and dissemination among Federal and Territorial Government agencies. An office with an annual budget of C$1.3 million was opened to facilitate this agreement. The office will conduct integrated regional and local mapping, as well as digital compilation of existing minerals data.
China continues progress away from total central planning with the gradual conversion of State-owned facilities by privatization to a capitalized status involving share ownership by investors, workers, and the State. The China Aluminum Corp., The China Copper Lead Zinc Corp., and the China Rare Metals and Rare Earth Corp. will represent the Government as a shareholder of their related subsidiaries (MCS 2000, p. 7). Foreign mining companies may acquire a 100 percent equity interest in non-diamond exploration concessions under a new Mining Code. Other elements of the Code include: mineral ownership is retained by the State; royalty payments are set at 4 percent for gold, 2 percent for base metals; and specific regulations govern permitting and exploration rights, which can be transferred, provided that certain conditions apply (Northern Miner, November 1, 1999, p. 5).
Mineral-resource exploration and development in Western Europe have been encouraged by up-to-date mining legislation, deregulation, and tax relief. The countries of Europe and Central Eurasia continued to reform their respective economic, social, and political environments throughout 1999 in spite of the continuing Russian financial crisis. The European mining industry remained vulnerable to legislation that affected its competitiveness in comparison to other non-European Union (EU) operations. During 1999, a directive on landfill waste was adopted and the “Water Framework Directive” was proposed (E&MJ, November 1999, p. 13ww). These pieces of legislation have the potential to influence the direction of mining in Europe.
Investors seemed to be waiting for FSU countries to establish more reliable financial structures and the economic situation in these countries to stabilize before committing new monies to the mineral industries of this region. During 1999, focus was placed on reviewing the Russian Subsoil Law. Changes have been proposed that would allow the discoverer of a mineral deposit to automatically obtain an exploitation license and foreign mining companies to participate directly in the bidding process without obtaining regulatory permits (Mining Journal, September 3, 1999, p. 186). In this year of transition, most regional trading took place among EU nations and the transition-economy countries of the FSU and Central Europe (MCS 2000, p. 10).
Privatization and mining law reform continued in Latin America, albeit at a reduced pace from 1998. Bolivia continued to seek the guarantee of private investment to sponsor growth of its economy by removing most barriers to overseas investment and any discrimination against foreign enterprises. Exploration interest in Peru is related to the recent privatization process and a new system for acquiring and registering exploration concessions. Privatization of all State-controlled mining companies in Peru is expected to be completed in 1999. Political, social, and economic issues affected the growth of the Chilean mining industry in 1999. The presidential elections of 1999 are expected to affect subsequent exploration activity. Exploration of mining areas along the Chile-Argentina border increased following the approval of the Campos de Hielo treaty, which should allow free access for border mining projects. Although Brazil had been a primary focus of mining industry concern in 1998, interest in Brazil appeared to rebound after 1998 presidential elections and the devaluation of local currency. Recent changes in mining laws spurred interest in Ecuador and Honduras, but decline in Venezuelan exploration activity continued in spite of recent elections and investment law changes.
In the United States, no changes in the Mining Law of 1872 were enacted in 1999, although there was ongoing reform activity. Three land use issues were considered in 1999: Hardrock Surface Management Regulation revisions involving a National Academy of Sciences study to ensure adequate protection of Federal lands; Endangered Species Act reforms; and the American Heritage Rivers Initiative, which would require Congressional approval before any land could be declared a World Heritage Site, and thus be removed from exploration or mining (Mining Journal, May 21, 1999, p. 3).
In summary, sustained low commodity prices and unsettled financial markets have continued into 1999, resulting in reduced exploration budgets worldwide. Exploration activity continued, but often at a reduced level or with a redirected focus, as exploration companies adjusted to changing market conditions.
The USGS collects and analyzes data on more than 100 mineral commodities, both in the United States and worldwide. This article draws from both public and private sector sources and the knowledge and expertise of USGS mineral commodity, country, and mineral-resource specialists. More detailed information on the material covered in this article may be obtained from the author, David Wilburn, U.S. Geological Survey, P. O. Box 25046, MS 750, Denver Federal Center, Denver, CO 80225-0046; telephone 303-236-8747, extension 337, fax 303-236-4208 or email@example.com. For additional USGS information on mineral commodities and foreign minerals activities, inquiries may be directed to Kathy Keys, U.S. Geological Survey, 988 National Center, Reston, VA 20192; telephone 703-648-4961 or firstname.lastname@example.org.
1Information from Metals Economics Group’s Strategic Report 1999study. Metals Economics Group, P.O. Box 2206, Halifax, Nova Scotia, Canada B3J 3C4; Phone 902-429-2880 or Fax 902-429-6593.