Mining Exploration Trends: Spending Cuts Amid Rising Lithium Investment
The landscape of mining exploration has witnessed significant changes over the past two years, marked by a discernible reduction in expenditure. Major mining corporations have curtailed their exploration budgets, largely due to inflationary pressures, escalating interest rates, and fluctuating commodity prices that have hindered market momentum.
Overall Exploration Spending Decline
According to S&P Capital IQ, total exploration expenditure declined for the second consecutive year, dropping by 6% to $12.5 billion in 2024. This follows a surge in spending that characterized the post-pandemic era, showing that current economic conditions are prompting a reassessment of investment strategies in the mining sector.
Shifting Focus: Lithium and Copper Exploration
While overall exploration spending has dwindled, investment directed towards lithium exploration has continued to rise sharply. Since 2020, spending in this area has increased annually, culminating in a staggering 360% jump to $1.1 billion in 2024 compared to four years prior. In contrast, copper exploration, despite a 50% rise over the same timeframe, reflected a slight decrease from the previous year with an investment of $3.2 billion in 2024.
Commodity Demand Outlook
The demand for both battery and base metals, essential for various applications including electric vehicles and electrical infrastructure, is predicted to surge in the coming decade. Analysts caution that this rising demand could lead to significant supply constraints in the future. However, an oversupply of lithium has recently pressured prices downward, complicating the investment landscape.
Exploration Trends and Priorities
Kevin Murphy, director of metals and mining research at S&P Global Commodity Insights, highlighted a stark contrast in exploration spending compared to the previous commodities boom over a decade ago, noting that inflation, tighter monetary policies, and subdued market conditions have fostered a cautious approach among major players. In less favorable circumstances, companies often prioritize cutting exploration budgets.
Where the Money Goes
Last year, gold exploration received the highest share of investment, amounting to $5.6 billion, which represented over 40% of the total exploration budget. In the same vein, combined investments in copper, lithium, and nickel reached nearly 40% of the total exploration funding in 2024, an increase from 27% in 2020.
The Future of Greenfield Exploration
Despite the focus on existing mines, there is a recognition that investing in new locations—termed greenfield exploration—poses significant challenges. As Ciara Talbot, head of exploration at Vale Base Metals, mentioned, investors often prioritize short-term results, making it harder to justify long-term exploratory commitments. Nevertheless, she emphasized that the strategy must evolve, as the capacity to extract metals from existing sites cannot be sustained indefinitely.
Cost Pressures and Strategic Shifts
Mining operations have become increasingly expensive due to a decline in the concentration of recoverable metals and rising operational costs attributable to inflation. These economic realities have made mergers and acquisitions a more attractive avenue for growth, as highlighted by Murphy—who noted that such activities often result in smaller combined exploration budgets as businesses re-evaluate their priorities.
Leading Players in the Mining Sector
Prominent companies like Rio Tinto, Newmont, and Barrick Gold have consistently ranked among the top investors in exploration, reflecting their commitment to securing future resources despite the current challenges faced by the industry. It’s important to note that while the data presented includes investments in precious and base metals, it notably excludes sectors such as iron ore, coal, aluminium, oil, and gas.
