In 2020, the global economy came to a screeching halt as the COVID-19 pandemic rapidly spread across the globe. The pandemic created a public health crisis for humanity, crippling industries and inflicting devastating losses on both economic and human life. Industries, including exploration, faced uncertainty as travel restrictions and regional lockdowns limited mobility, supply chain networks were disrupted, and investments were delayed or deferred.
The uncertainty in the markets, however, drove investors to safe haven investments, such as precious metals, which rapidly increased commodity prices, pushing gold to reach historic highs. Towards the mid- to latter half of the year, economies began to reopen, and stimulus packages flowed into markets, causing base metals prices to rally, which continued through the end of the year. As an essential service supporting the global supply of minerals and metals, the mineral exploration industry was able to operate with COVID-19 protocols in place. Projects that were initially delayed, capitalized on the favorable commodity prices and available venture capital, attracting additional investment and budgets through 2020.
According to the 5th annual 2020 British Columbia Mineral and Coal Exploration Survey, while global exploration expenditures were down by approximately 11% for the year, the exploration price index saw recovery from a low in March to an increase of 26% year over year by August.1 Gold continued to dominate globally, whereas copper and other base metals faltered and saw the highest reduction in exploration spend.2 Nationally, despite seeing a marginal decrease, Canada’s exploration expenditure remained third in global rankings behind South America and Australia.2
In last year’s survey report, there was a notable shift in exploration towards base metals as BC seemed poised for a future of diversified metals. This trend was assumed to continue into 2020 as the demand for copper and other base metals was driven by strong global economic growth and electrification of everything.
BC exploration sector shows resilience in the face of a turbulent year
Using the data collected in this survey, BC exploration bucked global exploration trends in 2020, as the province saw a 28% increase in expenditure year on year. Exploration spend across the province totaled $422m, which is more than double the spend in 2016 and just short of the highs experienced in 2011 and 2013, respectively.3 While the number of projects was down by 13% in 2020, the total meters drilled were up by 40%, consistent with a trend towards late-stage exploration and increases in available budget. The Northwest Region continued to lead the way and contributed to over 50% of the province’s spend. Expenditures were up across all Regions except the Southwest Region.
Shift back to gold as base metals remain steady
In contrast to our prediction last year, gold exploration was dominant in this year’s survey, with the commodity seeing a 76% increase in exploration expenditure, as investors flocked to the precious metal, driving prices above $2,000/oz during the year.
The Golden Triangle of Northwestern BC continued to attract exploration activity as the ongoing infrastructure development continued to pay dividends, and investors capitalized on the high-grade discoveries supported by record high commodity prices. The North Central and South Central Regions saw significant increases in gold expenditure, and now account for almost half of gold expenditure for the province.
Despite base metal prices increasing through the latter half of 2020, expenditure was down in this year’s survey. This pattern was consistent with the global exploration trend highlighted earlier; however, the decrease was primarily driven by a decline in investment in a few projects in the region (large nickel and zinc/lead projects). Copper exploration saw a slight increase, despite prices rallying to new highs toward the end of 2020. As global economies began to reopen and adjust to the new norm, so demand and prices for base metals began to increase.
A noticeable movement towards late-stage exploration
The outlook for the mining and metals sector in BC is largely influenced by the success of early-stage exploration. Over recent years, there has been a notable shift away from early-stage exploration towards advanced. In 2020, this trend may have been accelerated due to pandemic restrictions and regional lockdowns, impacting grassroots and early-stage investment.1
Grassroots and early-stage exploration accounted for 35% of total exploration in 2020, compared to 40% in 2019 and just 14% in 2014, as exploration spend moved to the advanced and mine evaluation stages. A decline in the number of projects and significant increase in meters drilled supports the shift towards later-stage exploration.
The unexpected and uncontrollable events of last year played a significant role in the commodity price boom, which supported the increase in exploration expenditure in BC. Whether these trends will continue in 2021 remains to be seen and will ultimately be determined by a number of external factors such as our ability to control the spread of the COVID-19 virus and the speed at which lockdown and travel restrictions are lifted. Administrative and political changes in 2021 may play a role in easing global trade tensions as not only borders but also economies continue to reopen and drive demand for a diversified mix of commodities.