Reaching for Growth: Charting Silver Miners’ Exploration Spending



Long-term sustained growth

After years of cutting back on sustained capital expenditure, silver miners (SIL) have started to refocus on production growth. Increased exploration and capital expenditure budgets have been the key themes of miners’ earnings in 2016. Sustained growth is one of the prerequisites for sustainable outperformance over the long term.

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Focus on exploration sharpening

In 2017, Coeur Mining (CDE) will almost double its exploration spending on new resource identification, to $14.0 million–$17.0 million. A large part of the budget will be spent on its Palmarejo, Kensington, and La Precosia operations.

Similar to other silver miners, Coeur underinvested for several years due to weak precious metal prices. However, Coeur’s exploration spending started picking up in mid-2016, which should help it extend the life of its operations.

Hecla Mining’s (HL) exploration expenditure for 2017 is expected to be $20 million–$25 million, higher than its expenditure of $14.7 million in 2016. The higher expenses are due to Hecla’s aggressive exploration at San Sebastian, Casa Berardi, and Greens Creek. According to CEO Phillips S. Baker, Jr., “The margins we expect to generate give us the flexibility to increase our exploration budget by about 80%, with a focus on extending mine lives, yet still generate positive cash flow in 2017.”

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In mid-2016, Pan American Silver (PAAS) increased its exploration budget to $14 million. Through exploration initiatives, it was able to replace its silver reserves in 2016. In 2017, it is planning a more aggressive exploration program, by investing a total of $21 million. The program will mainly focus on diamond drilling at its operating mines and 22 kilometers of drilling at select regional exploration projects.

Exploration success driving growth

First Majestic Silver (AG) is planning capital expenditure of $124 million, comprising $46.2 million towards sustaining requirements, and $27 million towards exploration. The total represents a 40% increase from 2016. This increase is aligned with First Majestic’s strategy of developing its mine production as well as preparing for the upcoming expansion at La Guitarra and La Encantada. The exploration discovery potential at Plomosas and Santa Elena’s Ermitano West property is a major future catalyst for the company.

In 2016, Tahoe Resources’ (TAHO) exploration expenditure more than doubled, reaching $14.4 million. It is expected to double again in 2017. Tahoe achieved positive results from its exploration programs in Peru and Canada in 2016. The company was able to identify new near-pit oxide zones as well as three large mineralized district targets at the Shahuindo, Timmins West, and Bell Creek mines. These results highlight the potential to increase mine life and grow production in both countries. Its drilling programs in 2017 are focused on establishing mineral resources at new areas of mineralization identified in 2016. The company has guided for exploration expenses of $35 million–$45 million in 2017.


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