BHP has announced a renewed focus on exploration, targeting “opportunities across copper and oil”, aiming to spend nearly 20 per cent of its capital budget on exploration.
Speaking at Citigroup’s Mining Exploration Day in Sydney, BHP’s head of geoscience, Laura Tyler, has reiterated the miner’s focus on exploration laid out earlier this year by CEO Andrew Mackenzie.
In May Mackenzie outlined the miner’s focus on strengthening its assets and taking proactive action to build now for future commodity strength.
“We are increasing our exploration activity to take advantage of falling costs as others pull back,” Mackenzie stated, marking the current trend across the industry to slash exploration budgets as a cost saving measure.
“We have embarked upon one of our most significant oil exploration programs, accelerating activity in our three priority basins,” he said, which comprise the Gulf of Mexico, the Caribbean (in Trinidad & Tobago, and Barbados), and the Northern Beagle sub-basin off the coast of Western Australia.
“We have established a new global technology function to implement integrated programs to unlock resources and lower costs. We have opportunities identified at a number of our major assets that we expect to create significant value over time.”
Tyler has supported this stance today, stating “exploration is seen as a key source of value creation for BHP”.
She went on to outline the miner’s apparent different position on exploration at a time when geoscience job levels continue to plummet.
“We are investing at a time when most of our sector continues to reduce discretionary spend,” Taylor said.
“Next financial year, we intend to invest approximately US$900 million in exploration, which represents 18 per cent of our overall capital budget.”
“We have reduced exploration operating costs by 70 per cent since 2013, and this year we have increased the targets tests by 44 per cent.”
According to the latest Australian Bureau of Statistic figures, the trend estimate for total mineral exploration expenditure rose 2.7 per cent, representing an additional $9.7 million in spending and bringing the December quarter to $364.1 million.
Most of the increase was spent in Western Australia, with the mining state up 3.1 per cent or $6.5 million.
Greenfields exploration showed new promise, with estimates for metres drilled up 3.7 per cent in the December quarter, 1.1 per cent higher than the previous December quarter 2014 estimate.
The seasonally adjusted estimate for metres drilled rose 9 per cent in the quarter. In original terms, metres drilled rose 6.9 per cent, while drilling in areas of new deposits rose 29.6 per cent.
Association of Mining and Exploration Companies chief executive officer Simon Bennison said the latest figures showed signs of promise, with an increase in metres drilled in new deposits during a traditionally negative quarter.
“Compared with the September 2015 quarter, greenfields metres drilled is up 30 per cent in the December 2015 quarter whilst expenditure is down 8 per cent. The cost of exploration is coming down as would be expected in the current market conditions,” he said.
Australian government bodies have also increased their focus on the sector.
The State Government is supplying the funding from a pool of $5.14 million, marking the eighth year of the exploration funding which has aided more than 640 projects and produced more than 20 new discoveries.
A world first drilling program trialling new technologies in South Australia is also expected to help revive greenfields exploration.
At a Federal level, a new five year, $100.5 million program was launched to support exploration, although Queensland has neglected exploration initiatives in the state.
In terms of BHP’s exploration focus, Tyler stated the company is “challenging existing paradigms with a scientific based and disciplined approach”.
Its copper exploration program is targeting Tier 1 greenfield assets, with a focus on copper porphyry and skarn deposits in Chile, Peru, and the south west of the US; sedimentary hosted deposits in the north of Canada; and iron ore copper gold deposits in South Australia’s Stuart Shelf, adjacent to Olympic Dam, which is currently undergoing a rapid development to access its enormous – and relatively untouched – Southern Mine Area.
The miner also plans to establish a Geoscience Centre of Excellence to aid its exploration efforts, Tyler adding exploration teams will be supported by globally integrated geoscience team “to facilitate a faster adoption of best practice and new technology”.