Exploration spending in the mining sector peaked in 2012 and has since declined for over a decade.
Last year, global funding for explorers dropped near lows last seen in 2005. This could mean funding has reached a cyclical low, and the industry may be ready for renewed interest and increased investment.
Speaking at this year’s Prospectors & Developers Association of Canada (PDAC) convention in Toronto, Kevin Murphy, research director for metals and mining research at S&P Global Market Intelligence, ran through issues surrounding the flow of capital into mining exploration and shared his thoughts on whether the tide will change this year.
Why has resource exploration funding declined?
Several factors have contributed to the decline of exploration funding.
Murphy noted that in the past decade, interest in the mining industry has seen competition, with new investors pursuing headline-grabbing opportunities in cryptocurrencies and elsewhere in the tech sector.
Meanwhile, many older investors in the industry began using their profits to fund their retirements.
In addition, much investment in the resource sector is focused on mining rather than juniors, which perform the majority of exploration. There has been little trickle down in funding from the majors to the juniors.
Aside from that, Murphy explained that for many metals, including copper, the focus has shifted away from greenfield exploration aimed at discovering new deposits. Instead, copper majors are performing more mine site exploration aimed at expanding resources at existing operations and, more broadly, increasing efficiency.
While mine site exploration increases supply, Murphy said it indicates structural deficiencies in the future.
“We’re adding to reserves and resources, but we’re adding to old discoveries — so assets that were discovered in the ’90s, ’80s and the ’60s,” he said. While this is replacing current production, Murphy believes that more money should be spent on greenfield exploration and the discovery of resources needed to meet future demand growth.
When it comes to the gold sector, which has been focused on mine site exploration for a longer time, Murphy suggested the downward trend in exploration funding has multiple causes.
“It’s been a rough go in 2024 for the juniors, and the juniors historically love gold exploration,” he said. ‘There’s been some pretty high-level M&A, and we find in exploration that … when large companies come together, they pare down their assets, and what would have been a tier-one asset for one company becomes a tier two and is put on hold.’
Even though gold has soared to record high prices, greenfield exploration funding hasn’t benefited. This is largely due to high inflation over the past several years, which has pushed operational costs higher and decreased margins.
When these foundational challenges come into perspective, untying purse strings becomes more difficult.
How geopolitics impacts resource exploration funding
Geopolitics is another major factor in exploration funding in 2025, according to Murphy.
He shared his thoughts on how this can affect Canadian mining companies.
“The Canadian government — there’s a lot of uncertainty there, and also that uncertainty happens to flow through to some very important programs like the METC, which is very good for exploration,” he said.
The METC, or Mineral Exploration Tax Credit, is part of a flow-through scheme that passes on paper costs to investors, allowing them to claim a 15 percent tax rebate on their investments.
The program’s future was uncertain going into PDAC, but on March 3, the day after Murphy’s presentation, Jonathan Wilkinson, Canada’s minister of energy and natural resources, extended it until March 31, 2027.
Even so, a great deal of unknowns remain. The Canadian government won’t sit again until March 24, this time with a new prime minister at the helm and with the almost-certain fate of a new election being called.
The continual threat of tariffs from the US has added to the chaos.
Investor takeaway
Looking at factors that may move the needle on exploration funding in 2025, Murphy said gold should do ‘pretty well’ under the Trump administration given its status as a safe-haven asset in times of uncertainty.
At the same time, global electrification remains a focus, which could help metals like copper.
However, exploration funding for other metals isn’t looking quite so rosy.
‘Will that be enough to push us into exploration budget growth this year? I would argue absolutely not,’ he said.
“The question really is going to be how far down we go this year, and if gold majors in particular are going to be increasing their budgets enough to counter what people see as being a pretty sour scenario for a lot of other commodities,’ Murphy explained to the audience at PDAC.
Whether or not the exploration funding cycle has bottomed remains to be seen.
‘Financing conditions continue to be incredibly challenging,’ Murphy said.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.