MinEx’s Richard Schodde discusses the changes to global exploration trends seen over the last few years and why he is not quite as pessimistic as some about the future.
HALIFAX, NS (MINEWEB) – In this two part series Kip Keen unpacks the trends developing within the exploration sector, with the people that know it intimately.
This is not a tonic for those sick to the stomach as they contemplate the state of exploration spending and discovery trends. But then neither is it poison, exploration hemlock, taking you on the path to oblivion. It’s an interview with Richard Schodde, an academic and the owner of MinEx Consulting. He thinks and presents on exploration trends and recently produced a wide ranging synthesis on the exploration sector in a presentation entitled, “Long Term Outlook for the Global Exploration Industry ‘Gloom or Boom.’” (Outside link to presentation here; and full acknowledgement to the blog incakolanews.com for inspiration.)
Lots will strike you in the presentation. Some of it we show you here: Like China’s expenditures booming from almost next-to-nothing to 14% in the past decade. Or global exploration expenditures reaching near $30 billion in 2012, far up from under $5 billion back during hell days in the early 2000s. And – spoiler alert – Schodde doesn’t see them going back there either.
But more than anything else, Schodde captures the sector’s growing pains. Deposits have become harder to find, yes. They have also become harder to fund in a way not unlike the cost escalation that has undercut the mining sector. But, then, the shear increase in expenditures has, to a degree, made up for those shortcomings. Certainly not all the way. That’s one major point Schodde makes. He’s got a good stat there. He’s good at that.
Kip Keen: Tell me about the key findings from you latest research.
Richard Schodde: One thing that’s not really appreciated by the marketplace at this time is that over the last 30 to 40 years the number of discoveries that have been made goes up and down in proportion to how much has been spent. Then, in the last five or 10 years, there’s been a disconnect. That said, a lot of people show charts that have a discovery rate almost dissapearing. But a lot of that is actually an artefact of the data.
KK: Yes, I was wondering about that because you do see those presentations at conferences where things look really abysmal in terms of the track record of the industry, as far as making discoveries. But you point out that there is, as you say, an added factor with the delay in the reporting. Is that the primary factor separating your discovery estimates (higher) than some others?
RS: Exactly. Yes. And, in fact, there is a lot of the guff on that. It’s the glass half full, half empty story. Guess what? The commodity cycle is not that different. What’s great on the way up, is scary on the way down.
Look at the level of exploration that occurs at the moment: 2012 was an all-time high of nearly $30 billion. And I predicted that this would drop back to about $19 billion (a year) over the rest of the decade. When we compare it to where it was a decade ago, it is four or five times higher than where we were before. So there are material changes, even adjusting for inflation. It’s a lot stronger than where we were in 2000.
So it’s a question of your perspective.
Still, the interesting thing in the last five years is that there’s a gap between the results. When you go to conferences and see other people’s presentations, they usually have a very pessimistic outlook on the current situation. I think if you look at reports and presentations over the last 15 years, you always see the same lament: that it’s really grim.
Schodde is less grim, however.
My comment is, it’s really an artefact of the way the data is collected. When you make a discovery, it takes, on average, about three and a half to four years before you actually report a maiden resource on that deposit. In some cases it may take you up to 10 or 15 years until the maiden resource comes out.
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