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SNL Metals & Mining: Top gold producers foregoing early-stage exploration

An analysis of the data compiled in SNL Metals & Mining's recently released profiles SNL-Globalof the world's top 20 gold producers reveals that the major gold miners have significantly shifted their exploration focus over the past decade. The profiles form part of the Strategies for Gold Reserves Replacement study series of reports.

As illustrated in the charts below, the top gold producers have shown a trend toward increased mine-site exploration at the expense of grassroots exploration over the past 10 years. From 2006 to 2015, the share of the group's total gold exploration budgets devoted to near-mine work rose from 44% to 54%, while the share allocated to greenfields programs decreased from 40% to 22%. In dollar terms, mine-site exploration's lead over grassroots exploration jumped from a mere US$36 million in 2006 to US$470 million in 2015.
The increased focus on mine-site work in recent years has been due to the major producers spending more at and near their mines to replace or increase reserves depleted by mining and to develop new reserves more quickly at lower costs by using existing infrastructure.
Gold Fields Ltd. is a vivid example of this trend, and has even admitted its lack of success in greenfields exploration and in taking projects from initial discovery through construction and into production. Despite having spent roughly US$600 million on early-stage exploration since the founding of the modern Gold Fields in 1998, and despite the discovery of two multimillion-ounce deposits, Gold Fields has not taken a single project from discovery to production, demonstrating how elusive greenfields exploration success can be. As a result, the company has made a strategic shift from capital- and time-intensive exploration-led growth to a program of brownfields exploration and opportunistic, value-accretive acquisitions.

In late 2013, Gold Fields eliminated its Growth and International Projects division, and announced a drastic cutback of its greenfields exploration projects portfolio. Responsibility for exploration was devolved to the group's operating regions, with a focus on near-mine activities. The company's grassroots exploration budgets went from a high of more than US$92 million in 2012 to zero in 2015. By contrast, Gold Fields has been very successful with near-mine exploration, particularly at its orogenic-style orebodies in Australia and at Damang in Ghana.







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