Good news for Australia: gold explorers are spending again, and there’s a shade of green to it. No, not US dollars — greenfield exploration.
Recent data from the Australian Bureau of Statistics shows that general gold exploration is up 40% on the previous year.
Importantly, resource firms are hunting in new areas to find gold.
Exploration drilling is broadly split into two categories: brownfield and greenfield.
Greenfield refers to areas that haven’t been previously explored and/or aren’t known to hold gold already.
Gold explorers always face the same constraints: time and money. Neither is infinite. It’s therefore less risky for companies to look for gold in areas close to known gold mineralisation. This type of exploration is referred to as brownfield.
Even working mines can still have adjacent areas that can be explored and drilled. Another benefit is the project area is likely to be close to existing infrastructure. Brownfield exploration is a legitimate way to bring new gold to market.
Greenfield exploration carries higher risk. There are no known deposits or working mines nearby.
Usually, there is less data for geologists to work with. The potential reward is higher, however, because discovering a new gold province could result in a significant increase in project value.
In the oil business, these firms are called ‘wildcatters’ — those who look for oil in remote, unproven areas.
At some point, too, the gold industry knows its existing resources and reserves will be depleted and need to be replaced. New sources of gold will eventually have to be found.
That drives gold companies to spend money on exploration.
“When drill rigs are searching for new deposits and explorers are active, it bodes well for Australia and the possibility of finding future mines,” says Neil van Drunen, acting CEO of the Association of Mining and Exploration Companies (AMEC).
There is also something intangible to be gleaned from higher levels of greenfield exploration.
It demonstrates industry confidence.
All mining companies are accountable to their boards and owners, whether public or private. They are not going to allocate exploration budgets lightly or deliberately squander precious capital.
The high gold price and large margins on offer are currently drawing investment into the industry, suggesting companies expect the favourable conditions to continue.
Van Drunen adds that “these results demonstrate geopolitical events haven’t dampened enthusiasm for exploration, and our industry is finding a way”.
“The most encouraging figure is the 69% jump in greenfields drilling metres. It reflects the desire of many of our member companies trying to find new deposits.”
Write to Callum Newman at Mining.com.au
Images: Unsplash
