Exploration funding is expected to contract as firms shift their focus to production.
Melbourne, Australia (PRWEB) January 12, 2014
Mineral exploration is aimed at discovering ore bodies that can subsequently be mined. The industry aims to identify a pipeline of economically proven resources for the future development, production and export of mineral resources. IBISWorld industry analyst Caroline Finch states, “Activity within the industry is often taken as a lead indicator for mineral output and the industry's performance moves ahead of the wider Mining division.” Over the past five years, the Mineral Exploration industry has grown at a compound annual rate of 8.5% as exploration works have been undertaken to support new mining developments. Higher commodity prices have also spurred on exploration activity. This has increased the rewards that industry participants stand to gain from mineral exploration, which is an inherently risky activity. The industry is expected to spend $3.7 billion on exploration in 2013-14, compared with $2.4 billion in 2008-09. In the past two years, the operating environment for the industry has started to shift.
According to Finch, “The increasing global mineral output, combined with a slowing Chinese economy, has suppressed world prices for the major commodity groups that the industry explores for.” Due to the declining trend in commodity prices, and the peaking of investment in the domestic Mining division, exploration spending is expected to fall by 5.2% in 2013-14, following on from a drop in 2012-13. This decline comes largely in response to generally lower mineral prices, especially in the early part of the year. Due to this fall, some industry operators will shift their focus from exploration to production.
Commodity prices are expected to continue to moderate in the next five years. With less incentive to carry out exploration, funding streams for the industry are anticipated to dry up. For established miners, lower commodity prices will put pressure on the profitability of their main operations, and will reduce the rewards from successful exploration. Established miners are expected to curtail exploration budgets in Australia over the next five years. Junior miners rely on positive business sentiment to access equity to fund exploration, and this too depends on higher commodity prices. As they struggle to access cash, their presence is also expected to decrease.
Market share concentration in the Mineral Exploration industry is relatively low. The low concentration reflects the entities involved in exploration. Almost all miners with established operations undertake exploration, heavily weighted towards brownfield exploration near existing sites. At the other end of the spectrum, numerous so-called 'junior miners' are active in the industry. They are more likely to have taken out a minerals exploration licence for a greenfield site. In general, smaller operators have less diversity across the minerals they prospect for, as they are typically more specialised operators. For more information, visit IBISWorld’s Mineral Exploration report in Australia industry page.
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IBISWorld Industry Report Key Topics
Firms in this industry explore for minerals (except for crude petroleum or natural gas) either on their own account or on a contractual basis. The industry includes the in-house exploration activities of mining companies and the activity of firms undertaking exploration on a fee or contract basis for other companies and firms providing exploration services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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