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Gold/Mining/Energy : SRU-ASE : STARFIELD RESOURCES
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To: CIMA who wrote ()1/24/2000 1:34:00 PM
From: winston.s.c  Read Replies (1) of 1239
 
Falling mining exploration will curb supply - WDR
LONDON, Jan 21 (Reuters) - Falling mining exploration expenditure will constrain future metal supply and should lead to a significant revaluation of commodity prices and the resource industry, said Warburg Dillon Read in a research note.

``The trend in falling exploration will undoubtedly constrain future supply in an industry built on an exhausting resource base,' said Warren Oliver and Peter Hickson in a note on Thursday. ``This should lead to a significant re-rating of commodity prices and the resource industry.'

Recent mine-exploration surveys show a run-up in exploration spending in the mid-1990s, reaching a peak in 1997 and then a sharp decline in 1998. Research by Canada consultancy MEG shows a further decline in 1999, WDR said.

The cumulative 1997 to 1999 decline is 50 percent, with total expenditure dropping to $2.7 billion in 1999 from $5.1 billion in 1997, said WDR, quoting the MEG report.

The decline stems both from falling profitability and increased management focus on raising returns on capital employed rather than on growth, WDR said.

Australian research organisation ABARE said in December that a sustained period of high prices would likely be necessary before companies reinvest in exploration there.

``The metals price rally of 1999 which has continued into early 2000 may not immediately pass through into higher exploration spending. Even if and when it does, the impact on actual production could also show a considerable lag,' WDR said.

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