Exploring through the downturn

September 2016: “Without exploration, there is no mining,” highlighted Sergio Hernandez, executive vice-president of the Chilean Copper Commission (Cochilco) in his opening speech at Chile Explore Congress: Change 2016.
The two day conference took place on September 7th-8th at the Grand Hyatt Hotel in Santiago.
Unfortunately the mining industry is passing through one of its longest downturns on record with copper prices now at their lowest point since the global economic crisis in 2008. One consequence: annual spending in mineral exploration in Chile has fallen over the three last years from a peak of over US$1B in 2012. “In 2015, they invested US$615M, US$90M less than in 2014,” the official explained.
Mineral exploration is an investment which brings with it a high degree of risk. “Exploration is often one of the first items that mining companies cut,” the official said noting that many companies were having to reduce expenditure as they saw their revenues squeezed by the fall in metals prices.
However, as a country which depends on mining for its livelihood, Chile needs to keep exploring or risk seeing mine production stagnate. Fortunately, Chile’s huge geological potential continues to attract investment in mineral exploration. Between 2001 and 2015, 35 new copper deposits and three gold deposits were discovered in the country.
“These are all economically viable to different degrees and this gives some peace of mind despite the drop in the copper price and the fall in exploration spending,” Hernandez highlighted.
Joint ventures
As part of the government’s efforts to attract exploration dollars to the country through the downturn, Chile’s mining development agency ENAMI has launched an exploration model based on joint ventures with private third parties, explained ENAMI’s head of projects Elmo Orrego. ENAMI provides areas with geological potential from its significant portfolio of mine property for private companies to invest in through an option agreement
Barrick Gold (TSX: ABX) has signed one such agreement for the Tres Puntas project in Region III under which it will invest US$3.5M in exploration work and pay ENAMI US$650,000 for the rights. Meanwhile, Rio Tinto (LON: RIO) has committed to spending US$6M at Leoncito El Loa in Regions I and II and making option payments to ENAMI worth US$1.5M.
Venture market
The Santiago Stock Exchange, the second largest in South America, is also promoting investment in exploration, said commercial manager Lucy Pamboukdjian. An agreement signed last year with the Toronto Stock Exchange which allow junior mining companies to list their shares in both exchanges and thereby raise capital not only Chile, but across the region, thanks to the Integrated Latin Market. So far twelve companies have taken advantage of the mechanism to list their shares in Santiago, including Red Eagle Mining (TSXV: RD), Chilean Metals (TSXV: CMX), and PPX Mining (TSXV: PPX), all of whom were present at Chile Explore Congress.