EY report – now is the time for exploration. [Posted 6 Oct 2015, 137 views, 14 likes, 0 comments]

Ernst & Young (EY) latest annual report [Business risks facing mining and metals 2015-2016] analyses and ranks the top business risks in the global mineral and coal industry. “Mining and metals companies that best understand the risk scenarios and potential impacts on their businesses are better positioned to manage these risks and seize strategic opportunities”.

The report acknowledges most mining companies are focused on survival strategy for the next year or two. However, other companies are looking at growth opportunities, to position themselves to be leaders in the next upswing of the metal and coal markets. One current trend is a drastic reduction in exploration across the industry in 2013 – 14, indicting a future supply shortage and thus a return to a commodity upswing. Furthermore, some mines are exhausting their economic reserves, raising concerns over these companies future performance. Also, there are few brown-field opportunities available. Companies need significant capital when looking for growth through mergers and acquisition or to develop their company vertically (coal companies becoming power plant owners). One cost minimizing option is to invest in green-fields exploration, where choosing the right target and engaging experienced exploration managers will reduce the exploration risk. Greenfields exploration takes time to deliver results, and thus such exploration should start now. The EY report goes on to look at funding options for exploration.