Exploring the global mineral exploration business

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

Ontario Mining Association member Boart Longyear provided a glimpse of the growing global mining exploration industry at an investor event held at its North American headquarters in Mississauga recently.  An audience of about 50 people including bankers, investors, analysts and Boart Longyear customers were on hand for the presentations.

Setting the stage was Jason Goulden, Vice President Research for the Metals Economics Group (MEG), which is based in Halifax.  His company plots trends in exploration spending, locations, commodities and other related data.  More than 3,500 companies are interviewed annually for its major survey and it is estimated to take into account 90% to 95% of all mineral exploration spending.

MEG estimates global mineral exploration spending to reach $21 billion in 2012, a 17% increase from the $18 billion invested in mineral exploration in 2011.  “This is a small change in what we have seen in the past few years, but it is still an increase,” said Mr. Goulden. 

He commented on the cyclicality of the business.  He noted that a low of $2 billion was spent in this area during the recession of 2002 but that by 2008, the total had climbed back up to $14 billion.  “Gold and base metals account for 70% to 80% of the spending,” added Mr. Goulden.  “The percentage spent on gold exploration has increased the past few years and in 2011, gold accounted for almost 50% of global mineral exploration expenditures.”

Canada and Ontario attract a great deal of this worldwide mineral exploration activity.  Last year, Latin America attracted 25% of this investment, Canada 18%, Africa 15%, Australia 12% and the United States about 8%.   He also pointed out who is doing the mineral exploration work with a split of about 42% by junior companies, 40% by majors, 10% by intermediate sized companies and 8% by government and other sources.

Boat Longyear is one of the largest companies involved in the global mineral exploration business.  The company’s roots go back to 1890.  Today, Boart Longyear has about 1,200 drill rigs, new products, projected capital investments of $300 million and more than 10,000 employees worldwide.  It has corporate entities in 40 countries, approximately 35,000 suppliers and more than 9,000 customers. 

It has 1,500 employees in Canada, mostly in Ontario.  In Mississauga, administrative, marketing and research activities along with drill steel production take place.  In North Bay, it produces drilling consumables and drill rigs at a large manufacturing facility.

The extent of Boart Longyear’s global footprint was outlined through presentations by CEO Craig Kipp, Regional Vice President North America Steve Deck, Vice President Products Alan Sides, and Vice President Drilling Services Mike Birch.  “We are moving the industry into deeper, faster and safer drilling technologies,” said Mr. Sides.  Mr. Birch emphasized that value of the services provided by Boart Longyear is in the information that is contained in core samples brought to surface that lead to geological, engineering, financing and investment decisions to bring mineral deposits into production. 

It is not a chicken and egg argument.  Without the mineral exploration industry coming first to identify and delineate ore bodies, the mineral production industry would not have material to mine economically.  The big business of mineral exploration is the building block of its much larger brother mineral production sector.   Thanks to Boart Longyear for helping us understand this a little better.

June 25, 2012
 
In 2011, mineral exploration spending in Ontario reached a record $1 billion, accounting for 26% of the national total.