Where are the majors exploring?

IN A time of aggressive cost-cutting, ILN sister publication MiningNewsPremium takes a look at where BHP Billiton and Rio Tinto are spending their exploration dollars.
Where are the majors exploring? Where are the majors exploring? Where are the majors exploring? Where are the majors exploring? Where are the majors exploring?

Escondida, BHP Billiton

Kristie Batten

Rio spent nearly $US2 billion on global exploration last year, up on $1.4 billion in 2011.

However, as part of the company’s cost-cutting effort, exploration expenditure will be cut by $750 million this year, knocking it back down to $1.25 billion.

In its most recent quarterly report, Rio said it had bauxite greenfields programs in Australia, Brazil and Laos and diamond programs in Canada, Democratic Republic of Congo and India.

Drilling was conducted at two projects near the Amargosa bauxite project in Brazil in the December quarter, while drilling at Sanxai in Laos resumed.

Copper greenfield programs were extensive, with the company seeking the red metal in Australia, Chile, Kazahkstan, Peru, Russia, the US, Zambia, Mongolia and Papua New Guinea.

In South Australia, Rio is in a copper joint venture with Tasman Resources, which recently returned some promising results, including 517.7m at 0.15% copper, 0.04 grams per tonne gold and 25 parts per billion palladium.

The company said during 2012 work advanced at the Resolution copper-molybdenum project in Arizona, though any development progress there waa being stalled by land issues.

Work continued at La Granja in Peru, a deposit the company acquired in 2006.

Rio says La Granja is the largest undeveloped copper resource in Latin America, containing an estimated 2.8 billion tonnes at 0.51% copper and 0.11% zinc, based on a 0.3% copper cut-off grade.

Exploration work is also underway around the Oyu Tolgoi development in Mongolia and the Eagle development in the US.

Meanwhile, greenfields nickel programs are underway in Canada, while Tamarack in the US is considered an advanced project.

The company said a drilling program at Tamarack last year intersected further zones of nickel sulphide mineralisation outside the currently known resource, with further drilling planned.

Iron ore exploration at advanced projects in Guinea and Australia continue, but the company also has earlier stage programs in Botswana, Canada, DRC and the Pilbara.

The company was recently encouraged by metallurgical studies on intercepts from Labrador in Canada.

Although the diamond division is under review, greenfields exploration has continued in Canada, DRC and India, including the advanced Bunder project in India.

Greenfields potash exploration is underway in Canada, with a 3D seismic survey completed over the Saskatchewan potash project, a JV with North Atlantic Potash, in the December quarter, which will be used to aid resource definition.

Rio said three regional holes were also completed which intersected a full section of potash horizons, highlighting the potential for future expansions to the core exploration area.

The company is exploring for coal across a number of countries and is working on resource models for the Mt Robert and Elphinstone projects in the Bowen Basin after completing drilling programs in the December quarter.

In a presentation at Investing in African Mining Indaba last month, Rio showed a slide showing active exploration programs in Namibia, Botswana, Mozambique, South Africa and Zambia, but listing exploration in Madagascar, Tanzania, Democratic Republic of Congo, Republic of Congo, Gabon, Cameroon and Mauritania as being under review, which raised a few eyebrows.

A member of Rio’s exploration team later clarified that “under review” in an exploration context merely meant the company was reviewing the prospectivity.

However, the company did say it had withdrawn from the Orientale iron ore project in DRC following a review.

Uranium is definitely on the agenda for Rio with recent greenfields exploration occurring in Canada, Australia and Namibia.

Rio said the third phase of drilling at the Z20 uranium project at its Rossing mine in Namibia recently started.

After acquiring Hathor Exploration in 2011, a drilling program at Roughrider in Canada confirmed extensions to the known uranium mineralisation zones with further exploration on the cards.

Meanwhile, BHP Billiton has outlined a much more focused greenfields exploration effort for 2013 after a $2.4 billion exploration spend in the 2012 financial year.

The company spent $671 million on exploration during the six months to December 31, well down from almost $1.1 billion in the same period of 2011.

However, $308 million of that was in the petroleum division, which is a major focus for the group.

Exploration in the 2012 financial year was focused on copper in South America, copper and nickel in Australia and iron ore and potash across a number of regions, but the company had narrowed its focus as part of a cost-cutting program.

“A 39 per cent reduction in BHP Billiton’s exploration expenditure to $671 million in the December 2012 half-year reflected the group’s sharpened focus on high value petroleum and greenfield copper porphyry targets, as well as a broader commitment to reduce discretionary expenditure,” BHP said in its recent half-year results.

“The associated decline in the group’s exploration expense increased underlying EBIT by $78 million, despite a $97 million impairment of previously capitalised exploration.”

Iron ore got the biggest spend ($129 million), followed by base metals ($110 million).

After spending $171 million in FY12 on potash alone, diamond and specialty metals expenditure for the half-year was just $73 million, due to the company’s withdrawal from Ethiopia.

Coal exploration spend for the December 2012 half was $25 million, while $23 million was spent on aluminium and nickel, with The Australian recently reporting the discovery of the Venus nickel deposit near BHP’s Perseverance mine in WA.

For 2013, BHP has said greenfields activity would now solely focus on advancing copper targets within Chile and Peru, and petroleum prospects in the Gulf of Mexico and offshore WA.

“Substantial mineralisation totalling 27.1Bt and a significant commitment to Andean copper belt exploration will ensure BHP Billiton remains a leading and highly competitive producer in the long term,” the company said in a base metals briefing in September.

However, the company said greenfields and brownfields base metal exploration peaked at over $250 million in FY12, with costs to be cut slightly in FY13.

BHP said its exploration success has resulted in a 95% increase in its copper resource base since FY08, with 1.5 million metres drilled over the past five years.

The company said discoveries had been converted into resources at Pampa Escondida, Escondida Este, Cerro Colorado, Spence hypogene and Antamina.

Resources in the Escondida mineral district had been doubled at a discovery cost of 0.1c per pound.

At Pampa Norte, resources were up 388% at a discovery cost of 0.3c per pound, with over 90,000m of drilling completed there

The Cerro Colorado porphyry deposit is considered a long-term development option and a successful brownfield exploration resulted in a 17% increase in the leachable mineral resource to 495Mt at 0.63% copper.

BHP said it was also committed to greenfields exploration across its Andean landholding, comprising around 17,000sq.km in Chile and 11,000sq.km in southern and central Peru.

This year work would ramp up on a number of multi-year exploration programs aimed at testing porphyry copper targets and more than 50,000m of drilling is planned during FY13.

The company said activities aimed at sustaining and building long term exploration pipeline, including third party commercial deals and title applications, were ongoing.