Current Approach to US Minerals Exploration

Introduction Metals exploration activity is moderately intense in the US despite the 1981-82 recession in the mining industry. Although exploration expenditures are significantly less than the 1981 peak, quality and goal orientation of current exploration are high. Major foreign and domestic mining companies as well as nonmetal companies had been attracted to invest in minerals in the US. Its capital markets, political stability, and open-door policy are attractive for hard mineral explo¬ration, particularly in the West. The approach was to either acquire fully or partially developed ore bodies through merger and acquisition, or to fund large scale exploration programs in search of bulk-tonnage deposits. The acquisition avenue has not proved the panacea envisioned for overcoming lack of substantive mineral development. Nor has the decentralized approach to exploration that was adopted proven cost-effective. The emphasis on gold, to the exclusion of all other commodities, raises questions regarding the direction of exploration in the US for the rest of the 1980s. Overview More than 300 companies are active in metals exploration in the US. These range from established, well-known domestic and foreign corporations to hurriedly incorporated, unknown companies financed by having promoted mineral prospects or occurrences of questionable quality. Junior companies tend to be oriented toward property entrepreneurship, rather than the development of minerals resources. These companies have helped maintain mineral lands from prospect to production by holding blocks of property intact during periods of exploration inactivity. This was done through promotional efforts, even though few properties that attracted major venturers proved to have real merit. Exploration objectives of senior and junior exploration companies currently embrace only a few commodities. Arranged in approximate descending order of priority, these are: precious metals; base metals in monometallic or polymetallic deposits; strategic metals, such as tungsten, tantalum, and tin; unconventional commodities, such as diamonds; ferrous metals; and commodities such as beryl, zeolites, and barite. Prospectors are important in searching for these targets. In the US, where they have been financed by major and junior companies, prospectors have proven a useful and low-cost means of locating gold prospects (e.g. the Alligator Ridge property in Nevada). The tenacity and persistence of independent prospectors have been factors in discovering properties rejected or overlooked by professional geologists (e.g. Lornex mine in British Columbia). This has been realized by the provincial government that grubstakes bona fide prospectors. Exploration interest in commodities has always been cyclic with price. Gold is one of the few metals that has experienced a price increase of such magnitude to warrant attention. The potential for realizing adequate operating margins for the Nevada open-pit "no-see-um" gold deposits is great. The present declining gold price, however, may indicate that this emphasis on gold, to the exclusion of other commodities, is shortsighted. Mining companies have been the last to react to price increases, opening new mines based on unrealistic market expectations. A scenario could develop where plummeting gold prices bring recession to the gold industry, as lately occurred in uranium, molybdenum, and copper. US Exploration Climate The US is attractive for exploration due to its strong mineral po-