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Exploration Spending to Stay Flat Despite Trump Pledges and Strong Gold Prices, S&P Says

Exploration Spending to Stay Flat Despite Trump Pledges and Strong Gold Prices, S&P Says

Despite solid gold prices, exploration spending in the mining sector will remain flat in 2025. It promises from President-elect Donald Trump to streamline regulations, according to S&P Global analysts. While some market conditions indicate rising commodity prices, particularly gold, financial constraints and tight capital markets are anticipated to limit exploration budgets next year, raising concerns for the long-term sustainability of discoveries.

During S&P Global’s quarterly State of the Market webinar, analysts pointed out that while commodities like gold continue their record highs, the amount spent on discovering new mineral sources may see minimal growth in 2025. One of the key factors restricting spending is a tight financing market, with a lack of capital for junior miners—who traditionally lead the way in exploration. Lower interest rates, the analysts argued, are unlikely to ease these financial restrictions.

Challenges for Junior Miners

Mark Ferguson, Director of Metals and Mining Research at S&P emphasised junior miners’ critical role in finding new mineral deposits. However, these smaller explorers are facing financial difficulties impacting the entire pipeline of new projects. “When juniors are underfunded, the whole pipeline feels it,” Ferguson noted.

In 2024, global exploration budgets for nonferrous metals dropped by 3%, from US$12.9 billion in 2023 to US$12.5 billion. Juniors, in particular, feel the pinch as they struggle to raise capital, even as commodity prices—including gold—remain high.

Exploration Activity Declines

S&P’s exploration activity indexes reveal the impact of these reduced budgets. The Pipeline Activity Index (PAI), which tracks drilling and project milestones, fell to its lowest level since 2016 in the third quarter of 2024, reaching a value of 63. Meanwhile, the Exploration Price Index (EPI), which measures metals prices, surged to 203. This signals that, while commodity prices are favourable, investment in new exploration projects is low, with companies focusing more on optimising existing assets rather than taking on high-risk exploration.

S&P’s associate research analyst, Jasper Madlangbayan, explained that a cautious investment landscape and conservative investor sentiment contribute to the decline in exploration spending. “Juniors have faced some of the hardest hits as financing has dried up,” Madlangbayan said.

Critical Minerals Show Resilience

Despite challenges in the broader sector, the analysts identified critical minerals as a bright spot. Demand for critical minerals like copper, lithium, and nickel is rising as the world shifts toward renewable energy and electrification. “Critical minerals remain a bright spot,” said Francesca Price, Senior Analyst for Critical Minerals at S&P Global. “There’s still investor interest in securing supply chains for these resources outside traditional, more geopolitically challenging regions.”

However, drilling rates have fallen for nearly all metals, with nickel projects seeing a 53% drop in drill holes compared to the previous quarter. Nevertheless, S&P analysts hope exploration activity could recover if metal prices remain steady.

Geographic Trends: Australia vs. the U.S.

Regional differences in exploration spending have become more pronounced. Australia, a hub for many junior explorers, has seen the most significant budget cuts, with Western Australia, a key area for gold and base metals, being hit hardest. “Australia’s large junior population is simply unable to support the same level of exploration that we’ve seen in previous years,” Madlangbayan noted.

In contrast, the U.S. exploration spending has shown more resilience, driven by increased investments in copper and lithium. This has been helped by policies like the Inflation Reduction Act, which has boosted the exploration of critical minerals in states such as Nevada and Arizona. Francesca Price remarked, “Sustained interest in the critical minerals supply chain should help buffer the sector from further declines in exploration.”

What Will a Trump Administration Mean for Critical Minerals?

The election of Donald Trump for the second term is expected to have significant implications for the mining and critical minerals sectors. With the Republican Party controlling the U.S. Senate, analysts are watching closely for how Trump’s administration will affect critical mineral exploration and production in the U.S. and globally.

Trump has promised to focus on domestic mineral production, emphasising reducing dependence on China. His administration is expected to implement more aggressive tariffs, including baseline global tariffs of 10 to 20 per cent to 60 per cent cents on Chinese imports. This could have far-reaching impacts on global supply chains, particularly in the critical minerals sector.

Trump’s stance on “decoupling” from China, combined with a focus on reshoring critical minerals production, could benefit U.S. producers while potentially sidelining foreign companies, including Australian miners, who rely on exporting to the U.S.

The Trump administration’s focus on reducing regulatory hurdles for domestic mining could also speed up permitting processes, making it easier for U.S. companies to commence or expand operations. His previous actions, including two executive orders to reduce the country’s dependence on China for critical minerals, suggest that the administration will continue prioritising boosting U.S. production of critical minerals.

However, these policies may also challenge junior miners abroad, particularly in regions like Australia and the EU, which could face tougher competition for U.S. market share.

Looking Ahead: A Cautious Yet Hopeful Outlook

S&P analysts predict that exploration spending may stabilise in 2025 for critical commodities tied to the energy transition, but the outlook for the broader sector remains cautious. As major mining companies increasingly turn to acquisitions for growth and junior miners continue to struggle for funding, there are concerns about the long-term health of new project development.

“The sector’s resilience is being tested,” Ferguson concluded, “but with demand for critical minerals high, there’s hope. Exploration budgets may stabilise in 2025 for the key commodities of the energy transition.”

While challenges remain, the continued demand for critical minerals—especially in light of policies under a second Trump administration—could provide a crucial lifeline for the sector.

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