VIDEO - Mark Ferguson: Gold Projects and Exploration Budgets in 2018

Mark Ferguson, associate director and head of mining studies for the metals and mining research division of S&P Global Market Intelligence, took some time to discuss increases in exploration budgets and what that means for mining in 2018 with the Investing News Network at PDAC. 

Ferguson said stronger metals prices spurred an initial surge in financings about two years ago, and “later in 2016 we started to see some of that money actually hit the ground. So we saw drill activity start to pick up, and that really carried through 2017.” He added that although financing levels have improved they lag behind where they were five to six years ago. He doesn’t see budgets returning to what they once were anytime soon.

He said, “[t]here’s been a focus on gold projects; that’s really what started to lift the junior sector back in 2016 with the financing.” Ferguson added that there’s been an uptick in the number of base metals projects drilled, with a particular focus on cobalt and lithium.

He noted that lithium has experienced “very strong growth, even stronger than cobalt. I think there’s over 130 companies exploring for it in 2017, and their budgets also went up … I think it has quadrupled.” He said lithium and cobalt exploration, driven by demand for electric cars, has “definitely provided some more momentum to the junior sector.”

Ferguson also explained that over the past 20 years companies have shifted away from grassroots exploration, but there has “been an uptick in the number of earn-in agreements” between major and junior companies. Ferguson expects that trend to continue because it is “providing support for the junior sector. It is encouraging them to go out and explore.”

Ecuador and Finland are “noteworthy countries” that are seeing a rise in their exploration budgets, while the Philippines, which banned open-pit mining, experienced a reduction in 2017.

Ferguson also said investors should choose companies that are more focused on generative or early stage exploration and have a longer-term view; planning for 15 to 20 years down the road instead of five years. “You’re going to see a nice return on your investment if you can stick with it, especially given the market volatility,” he added.

The transcript for this interview will be posted shortly. Click here to view our PDAC 2018 playlist.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.