Exploration spending hit where it hurts

Western Australia’s minerals exploration spending has reached its lowest level since the March quarter of 2007, according to the latest update from the Australian Bureau of Statistics.

The trend adjusted numbers, which exclude petroleum, show just $229 million was spent in the first three months of this year, a fall of around 8 per cent on the December figures.

However, the $229 million figure represents a 17 per cent drop on the same time last year, and is a long way below the record for a quarter, set just three years prior in March 2012 at $559 million.

If there is any positive news to come out of the ABS figures it is that WA contributed 58 per cent of the $397 million spent nationally on exploration.

Even that figure comes with a caveat, however, as Australia has fallen from 23 per cent of global resources exploration spending in 2000 to 11 per cent.

Association of Mining & Exploration Companies chief executive Simon Bennison said there wouldn’t be a rebound of exploration until companies could raise the capital for it.

“(Raising capital) is extraordinarily difficult in this climate given retail investors are so risk averse,” he said.

An upturn might occur towards the end of the year or early next year, he said, although an improvement in commodity prices would be of more immediate help.

The drop in exploration spending will potentially affect the number of viable projects in the next upswing, but at the moment it is reducing demand for drillers.

Swick Mining Services managing director Kent Swick said his business had improved utilisation rates in its portfolio in the March quarter, to more than 70 per cent of its fleet operating in field.

That was the highest level since March 2013. He said the company was performing well, given the depressed nature of the mineral drilling market.

Rates had been reduced during the two-year period, and had now stabilised.

For Boart Longyear, rig utilisation across its global portfolio of 35 per cent was up from 32 per cent in that quarter of the previous year, although in December 2014 that rate was 38 per cent.

Drillers had done extremely good deals to keep crews employed as demand had softened, according to Mr Bennison.

The reduced prices would mean explorers who had a good cash position could have opportunities, particularly those concentrating on gold, the price of which has stabilised.

Mr Bennison highlighted the state government’s exploration incentive scheme as another potential driver for explorers.

The government recently committed to fund the program at $10 million per year for the coming two financial years, touting a return of around $10 for every $1 spent.

The state government said the program would refund up to 50 per cent of direct drilling costs to a cap of $150,000 for a multi-hole project, or $200,000 for a single deep hole.