By Jo Clarke

June 2, 2020 - The trend of increasing spending on Australian coal, iron ore and non-ferrous metals exploration reversed during January-March, with more falls expected for April-June, with the impact of COVID-19 prompting most firms to cut all but essential expenditure.

Spending on mineral exploration in Australia had been steadily increasing on a seasonally adjusted basis since early 2016, as ageing mines required replacement and costs began to rise to a peak of A$753mn ($512mn) during October-December that helped 2019 become the highest spending year in seven years. It fell to A$602mn during January-March this year, which was up from A$506mn in the same period last year when Australia suffered a more disruptive wet season.

January-March is seasonally a weak period because of the rainy and cyclone seasons in Queensland and Western Australia (WA). But adjusting for this the last quarter was still a reversal of the upwards trend in exploration spending, with a further fall expected this and next quarter as firms curtail all but essential programmes. Most mining and exploration firms are conserving capital and only carrying out exploration that is required to keep operations running in the short term. Several development projects have been shelved, further cutting the need for exploration.

Spending fell across all minerals — including copper, nickel, base metals, iron ore and coal — but was in most cases still ahead of where it was during January-March 2019.

The fall was less pronounced in near-mine exploration than at new deposits, reflecting the need for nearby mine exploration to maintain production at some mines, particularly in the coal fields of New South Wales and Queensland.

UK-Australian mining firms BHP and Rio Tinto are both investing in new mining areas to try to maintain the quality and volumes of the iron ore that they produce from the Pilbara region of WA. They are also using more automated drill and blast systems that operate best with access to high-quality modelling of deposits that require additional exploration, which is helping to maintain iron ore exploration spending.

The largest fall in spending was for base metals other than copper and nickel.