* New deposits needed to offset aging mines
* Small miners need funding for new projects
* Codelco may look at Mexico, Colombia for deposits
By Josephine Mason
SANTIAGO, April 16 (Reuters) – Big copper miners need to
explore for new deposits in riskier locations to offset falling
output from aging mines and to meet rising demand for refined
metal, and will likely have to do the heavy lifting themselves
rather than rely on juniors.
Small- and medium-sized mining companies have typically done
the work of drilling and discovering new deposits often in risky
countries and often are later bought out by the larger players
who have the financial clout to bring a project into production.
But conditions are ever more challenging with costs rising
and junior mining companies facing severe trouble in securing
funding for projects. In addition, opportunities for exploration
in established mining-friendly countries are also diminishing,
forcing companies to look further afield.
This is a dramatic about-turn for the industry, which has
seen juniors outspend the majors since 2004.
“We need to take more political risk,” Michael Chender,
chief executive of Metal Economics Corp, told the CESCO
exploration forum in Santiago, adding that while risk tolerance
had recovered after plunging in 2008 and 2009 it had not
returned to 2007 levels.
Chile’s state copper giant Codelco, the world’s
No.1 producer, said on Monday it was interested in getting into
exploration in both Mexico and Colombia, as it looks to expand
beyond its local stable of world class deposits.
“We decided to start with exploration activities in Brazil,
which we have been doing for a while now,” Codelco CEO Diego
Hernandez told foreign correspondents on Monday. “Now we are
beginning exploration in Ecuador, and we would like to be in
Colombia too and eventually in Mexico.”
COLOMBIA TO DEVELOP MINERAL WEALTH
Colombia’s government said on Monday it expects to sell
exploration rights to its large untapped mineral resources next
year as part of its effort to attract foreign investment to
develop its gold, coal and silver mining sector.
The Colombian government’s new national mining agency will
coordinate the sale of rights to develop the country’s
unexplored mineral wealth as it aims to boost its income from
mining, which only accounts for 2 percent of the country’s
economy.
Some of the biggest names in commodities have already
expressed interest in taking part in what the government hopes
will turn into an exploration boom, deputy mining minister Henry
Medina told Reuters on Monday.
Medina said his ministry aims to lure foreign investment by
clamping down on illegal mining, tightening up regulation and
establishing a formal mining code. However the government will
not participate directly in any of the projects, he said.
“We don’t want to scare off investors. We want to be as
predictable as possible” Medina said.
This is particularly important given the turmoil seen in
other Latin American countries in recent years from Peru and
Chile, which both made dramatic changes to mining taxes, to
Argentina, where the government on Monday unveiled plans to
seize control of leading energy company YPF.
The aim is to increase mining investment to above the $2.6
billion invested last year, Medina told Reuters, but declined to
give a target figure.
Mining only accounts for 2 to 3 percent of Colombia’s gross
domestic product, which is small compared with oil, which makes
up 83 percent of total royalties, according to Claudia Jimenez,
who is head of the association created a year ago to promote
private investment in large-scale mining projects in Colombia.
“Colombia is not yet a mining country,” she said.
But that will change if investment takes off. The country
aims to raise coal output 35 percent to 115,000 tonnes annually
by 2014 from last year’s level of 85,000 tonnes and gold output
by 30 percent to 73 tonnes from 56 tonnes last year, she added.
GROWTH IN SPENDING TO SLOW
The rate of global spending growth in exploration is waning
after two years of stratospheric increases. The recovery in
copper prices has encouraged companies to expand their
exploration operations.
Spending will still rise, but will not match the 50-percent
rise last year and 44-percent growth in 2010, Chender said.
“Even if prices are higher, we’re hitting the limits on
spending,” he said.
A quarter of spending goes into Latin America which is
considered to be politically stable and to have an established
mining culture. That is equivalent to combined spending in the
United States and Canada.
Total worldwide copper exploration spending rose 60 percent
to $3.7 billion last year, with spending in Chile was up a third
to $585 million.
