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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Eashoa' M'sheekha who wrote (46697)	1/5/2000 11:50:00 PM
From: Alex	Respond to of 116770

Spending on mining exploration falls By Gillian O'Connor Two years of savage cuts have left mining companies' spending on exploration in 1999 nearly 50 per cent lower than in 1997, with gold suffering an even sharper reduction. African and Asian budgets have been cut proportionately more than those in Latin America. Even though base metal prices have recovered sharply in the past six months, total spending is likely to continue at a reduced level in the near term, since increases in companies' exploration budgets tend to lag behind metal price increases by a year. But any further reductions are not expected to be as precipitous as those in the last couple of years. Total exploration spending in 1999 is estimated at $2.7bn, compared with $3.5bn in 1998 and $5.1bn in 1997, according to Metals Economics Group, the Canadian consultancy. These estimates are based on the actual budgets of 132 companies, totalling $2.17bn in 1999, compared with $2.83bn in 1998 and $4.03bn in 1997, a 46 per cent drop over two years. These companies account for 80 per cent of the estimated total expenditure. Gold still attracted half the expenditure of $2.17bn, but its share has fallen from 55 per cent in 1998, and 65 per cent in 1997. And in dollar terms it has dropped by nearly 60 per cent in two years: from $2.6bn in 1997 to $1.08bn in 1999. Spending on base metals fell by a comparatively modest 26 per cent, to $801m over the same two years. Latin America remains the most popular target area, with 29 per cent ($830m) of the $2.17bn total. And, although spending there has fallen, the two-year drop is less than 30 per cent, compared with more than 50 per cent for Africa and 60 per cent for the Pacific/south east Asian region. Gold exploration has been suffering both from the steady decline in the metal price - until the autumn fillip provided by the European central banks' decision to limit sales and loans for five years - and from continuing investor wariness about financing exploration companies after the Bre-X scandal that rocked the industry in 1997. It was particularly hard for juniors to raise money for projects located in areas of perceived political risk, and even the majors cut their spending in such areas. Copper continues to attract the majority of spending on base metal exploration. Last year it accounted for just under 58 per cent of the sub-total, or $460m, compared with $552m in 1998. Zinc accounted for 23 per cent and nickel for nearly 20 per cent. But spending on copper has been falling more sharply than on the other base metals, with a drop of nearly a third over two years. MEG says that, although the copper price has rallied, LME stocks are high and the consensus is that oversupply will continue to undermine prices for several years. One reason is that there now seems little hope of cuts in existing production, partly because of new capacity on stream. Both Los Pelambres (Chile) and Batu Hijau (Indonesia) have recently started up, and others are under construction. The consultants cite zinc's comparatively stable long term outlook to explain the continuing interest in exploring for this metal. Zinc attracted $184m in 1999, only four per cent down on the previous year, and 14 per cent down over two years. Nickel attracted 18 per cent less in 1999 at $157m, after holding steady the previous year. But the price rose strongly for most of last year, despite the commissioning of the three new Australian laterite projects. "Ironically, some analysts expect that successful application of pressure acid leach (PAL) technology to laterite deposits could actually spur increased nickel exploration spending while depressing the price, as current sulfide-based producers scramble to reposition themselves lower on the cost curve by developing their own PAL projects," suggests MEG. Diamonds remained popular: at $228m the sum spent on exploring for diamonds in 1999 was higher than that spent on either nickel or zinc. This was mainly thanks to ongoing spending by De Beers, and an increase in Canadian spending by Rio Tinto. ft.com