As Rio Tinto Group searches Australia’s Great Sandy Desert for copper
and Anglo American scours a 19 000-square kilometer package of land in
Brazil, they’re among the mining giants stoking excitement over
potential reserves that’ll replenish project pipelines and overturn the
industry’s lack of recent success in unearthing deposits.
It’s part of a broader global push across the industry that’s driving
a revival in exploration spending on key metals, forecast to top
$11-billion after hitting a low of about $9-billion in 2016, according
to Melbourne-based MinEx Consulting.
To keep tabs on progress, investors last month pressed Anglo’s CEO Mark Cutifani for
details on his company’s campaign, while others are monitoring traffic
shuttling in and out of Rio’s expanding project in the Paterson district
in Western Australia, and consulting satellite imagery of the region in
an attempt to deduce the scale of the company’s activities.
“We have some very interesting targets, but we never say too much
about exploration -- I don’t want my peers to know what I’m doing,”
Rio’s CEO Jean-Sebastien Jacques said in an interview
last week. “Though they are looking very carefully, and using even
satellite images to try to see what we’re doing.”
Australia’s top gold producer Newcrest Mining and iron-ore exporter
Fortescue Metals Group are among others who’ve joined the quest for
untapped gold and copper in the Paterson region.
The area “is almost untouched from an exploration point of view,
because it’s under some sand cover,” raising hopes for major
discoveries, said Lynda Burnett, MD of Sipa Resources,
which is exploring about 10 kilometers (6 miles) away from Rio’s camp,
and has watched its larger neighbor’s operation swell. “Hopefully Rio
might be able to tell us more soon – we’ll just have to be patient.”
The recent upturn is exploration is also reviving partnerships
between the industry’s heavyweights and smaller, specialist companies, a
strategy that “came to a screaming halt” at the start of the decade
after the global financial crisis, according to Burnett, previously an
exploration executive with Newmont Mining.
Small investments in exploration carry less risk than acquisitions
with big price tags, and in the case of copper -- where deals have
proven hard to find -- offer an alternative route to growth, according
to Camille Simeon, an investment manager at Aberdeen Standard
Investments, which holds Rio and BHP shares. “It can be a sensible
approach, rather than buying something.”
South32 has been among companies to lead the way on striking new
pacts, Burnett said. It has made investments, or joint-venture
agreements, with about six companies that have given it an interest in
almost 20 prospects from Alaska to Peru, according to a May
presentation. In June, the producer agreed a $1.3-billion deal to
acquire one of the partners, Arizona Mining Inc.
“This approach has given us diversity of options and a cost
efficiency that is hard to beat,” South32’s head of corporate
development Simon Collins said in an emailed statement.
Rio also has forged a raft of alliances in recent months, looking for
copper and gold in Serbia and joining projects in the Paterson province
with Alloy Resources and Antipa Minerals. Newcrest has widened its
exploration work to take in eight countries.
“What we might see – over the next 12 to 18 months – is a bit more of that in the exploration space,” Justin Osborne,
executive director for exploration and growth at Gold Road Resources
told reporters Sunday at the Gruyere project in Western Australia. The
developer and its partner Gold Fields aim to begin production by
mid-next year from the country’s the most significant gold find since
2005.
The partnerships also allow cash-strapped explorers – which can have
difficulty accessing funds – to keep projects going, and retain at least
some exposure when any eventual breakthrough is made.
“The likelihood of you jagging the money hole in the first three
years is actually quite low, these things can take time to develop,”
Sipa’s Burnett said. “That’s really the junior’s role – we all want to
make a discovery on the first drill hole, but it’s often hole 100 that
does it.”
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