The latest report on world trends in exploration reveals a 26 per cent decline in activity as miners responded to falling commodity prices.
The report by SNL Metals and Mining shows worldwide non-ferrous metal exploration in 2014 had a budget of $US11.4 billion compared to $US15.2 billion in 2013.
The latest figures from the Australian Bureau of Statistics (ABS) for Mineral and Petroleum Exploration Australia show the situation here falls in line with global trends.
The trend estimate for total mineral exploration expenditure fell 1.7% (or -$7.7m) to $442.4m in the December quarter 2014.
The largest contributor to the fall in the trend estimate this quarter was Queensland (down 3.9% or -$3.6m). The current quarter estimate is 16.7% lower than the December quarter 2013 estimate.
SNL said the steep plunge in exploration spending was due to a combination of investor wariness of the junior sector which made it difficult for most companies to raise funds.
It also pointed to the pullback by producing companies on capital and exploration spending in order to improve their margins.
This was highlighted by the recent half-year financial reports released by the major miners.
BHP Billiton cut exploration and capex from $US22.3 billion to $US15.2 billion in the year to June 2014 and is targeting a $US10.8 billion range by June 2016.
Rio Tinto also took an axe to its costs, lowering expenditure for 2014-14 to less than $8.5 billion, the lowest since 2010.
While Anglo American announced it would reduce spending by up to $US1 billion in 2015 to $US5.2-5.5 billion.
The cuts come as both greenfield and brownfield developments are put on hold in light of falling commodity prices and higher operating costs.
Meanwhile, the trouble facing the junior sector is evident, with some companies folding before they can get off the ground.
In a clear sign of the affect the historically low uranium price has had, one company last year decided to ditch its hopes of developing a mine and instead focus on property development.
United Uranium holds several exploration licences in Western Australia including the Mt Danvers and Bremer Basin projects.
The company, which only listed on the ASX in 2007, was targeting early stage exploration at its tenements and seeking joint venture partners to help develop the resources.
However an extended lag in the price of uranium forced the junior to reconsider and it undertook a strategic review which led to the shift to the property market.
This may not be an isolated incident if Grant Thornton’s most recent junior mining and exploration (JUMEX) report is anything to go by.
“At the company level, management remains heavily focused on financing considerations, taking their time and attention away from the value adding operational and strategic development opportunities. Costs are cut to the bone,” Grant Thornton Australia’s national head of energy and resources Simon Gray explained.
“This is compounded by a lack of investor interest.
“Exploration companies are finding equity finance almost impossible to access as is reflected by the small number of IPOs for mining and exploration companies.”
A recent Deloitte survey said the survival of juniors was one of the most pressing issues for the sector in 2015.
Deloitte predicts the juniors who can position themselves for a market uptake now will be the best positioned once the commodity cycle becomes more bullish over the next few years.
“It is important (juniors) begin preparing for a potential market turn over the next 12 to 18 months,” the Deloitte report said.
“Those that succeed over the long-term will be those that are ready to exit the starting blocks first. That’s why management should already be taking a longer view of the market, preparing their systems and position for the upside.”