Written by Iain Thompson, EY Canada
Sustainable resource development is not just about meeting regulatory requirements, but an opportunity to drive innovation, improve operational efficiency, and secure a competitive advantage in this changing global market landscape. By aligning our mining operations with the energy transition, we can cater to the burgeoning demand for ‘green’ metals crucial for renewable energy technologies and cement our role as a key player in the path towards a sustainable, low-carbon future.
A robust exploration industry isn’t just about uncovering new resources. It serves as a bedrock for attracting future investments, which, in turn, fuel economic growth and stability. With this investment comes the creation of new employment opportunities, providing an economic boost for local communities.
This is particularly true on Canada’s west coast, where the industry is a significant economic contributor in British Columbia (BC) — where more than 1,100 publicly listed exploration companies call Metro Vancouver home. Further, the Mining Association of British Columbia states that the mining industry as whole supports more that 35,000 jobs and contributed $18 billion to the local economy in 2022.
Supporting a solid exploration sector is critical for sustaining the momentum of new projects. The discoveries made today become the mines of tomorrow. By continuously unearthing new mining opportunities, exploration plays a crucial role in securing the industry’s future. It provides a pipeline of potential sites ripe for development, which is integral to the continued advancement and profitability of the mining sector.
The British Columbia Mineral and Coal Exploration Survey does a deep dive into the state of the industry – reviewing trends from the year past, while predicting what 2024 could hold. This article explores three takeaways from companies surveyed ranging from grassroots and junior exploration companies to large-scale and publicly traded mineral producing companies operating across the world.
Decline in exploration, yet expenditures hold strong
Survey respondents reported $643 million invested into the exploration and evaluation of mineral deposits, of which $28 million was spent on First Nations community consultation and exploration agreements. While this represents the first year-over-year decline in exploration spend since 2015-2016, the overall expenditure amount is the third highest annual exploration spend recorded in the province over the past 10 years.
This is the result of tightening financial conditions spurred by central bank rate hikes, geopolitical tensions and macroeconomic headwinds that have combined to significantly impact exploration activity, both globally and within the province. In contrast to spending, the total number of exploration projects in 2023 increased by 6 per cent year-over-year. The average expenditure per project showed a 13 per cent decrease from $3.2 million per project in 2022 to $2.63 million per project in 2023.
Copper and coal cushioning the hit from precious metals’ slump
While there was an observed downturn in spending across most sectors within the exploration industry, the copper sector in BC continued to prosper. Spending within the copper exploration sector rose 4 per cent year-over-year, increasing from $235 million in 2022 to $244 million in 2023. Copper exploration spend accounted for 38% of all spend in 2023 – continuing the trend of increasing exploration market share in the province, representing 6 per cent year-over-year growth in 2023.
Most of this increased spend can be attributed to the green transition as copper is a key component of many large-scale electrification efforts such as electric vehicles and power grids. It’s worth noting that exploration for copper is also influenced by the geological make up of BC, which is prospective for porphyry deposits that are typically dominated by copper mineralization.
The coal sector also saw an uptick in annual spending, with expenditures more than doubling year-over-year. The sector saw a 109 per cent increase in spending from $12 million in 2022 to $26 million in 2023. The Southeast region of the province, in particular, is home to the projects that received the largest coal exploration funding in 2023. The Southeast received 77 per cent of total coal exploration spend in 2023, with four notable projects in the region receiving 74 per cent of all provincial coal exploration spend.
The Northeast and Northwest regions, home to the informal Golden Triangle, received the remaining 23 per cent of total coal exploration spend, at 10 per cent and 13 per cent respectively.
All coal projects in British Columbia are metallurgical coal projects. Metallurgical coal, or coking coal, is mined to produce the carbon used in steelmaking. Demand for steel is expected to continue to rise across the globe. According to the World Steel Association’s October 2023 Short Range Outlook Report, global steel demand is expected to grow 1.9 per cent year-over-year in 2024 to reach 1,849.1 Mt, up from 1,814.5 Mt in 2023.
Pivoting to established projects amid rough financing waters
Global exploration budgets for grassroot projects fell 10 per cent in 2023 – hitting a record-low share of global budgets at 23 per cent, furthering a global shift away from grassroots exploration. This risk-averse behaviour displayed globally by explorers was also seen in BC, where only 35 per cent of overall exploration spend was for projects in the earlier stages of the exploration lifecycle (grassroots and early stage), which represents a 4 per cent decrease from the share held in 2022.
The shift can be attributed to the increasingly difficult financing conditions confronting junior exploration firms due to stricter monetary controls. Meanwhile, junior companies with well-developed projects and major players are focused on expanding current deposits and addressing tasks such as permitting, environmental compliance and consultation.
In summary, the exploration industry remains a significant pillar of the economy, driving investment despite current geopolitical and financial challenges. In the context of BC, even with a decrease in overall exploration activities, spending remains robust, demonstrating the industry’s resilience. While most sectors saw a downturn, the copper and coal sectors continued to prosper, paving the way for continued growth in the face of declining interest in precious metals. These trends underscore the strategic importance of these commodities in driving green transition efforts and meeting global steel demands.
However, it’s evident that the industry is shifting its focus from grassroot projects to more mature endeavours due to tightening financial conditions. This risk-averse approach reflects the need for the industry to navigate current challenges effectively while ensuring continued production.
While this inflection point presents new challenges, it also offers opportunities for innovation and collaboration to thrive. The mining and mineral exploration sector must continue to adapt to these evolving trends, reinforcing its role as a critical economic driver, contributing not only to economic prosperity but also to the sustainable development goals of the region and beyond.