Gold Exploration Spending Declines Despite Soaring Prices: S&P Global Analysis

S&P Global released its annual analysis highlighting a perplexing trend in the gold mining industry: despite gold prices surging above $3,000 per ounce, global exploration spending for gold has been trending downward, with a 15% decline in 2023 and a further 7% drop in 2024. This decline, driven primarily by reduced allocations from junior mining companies facing tight financing conditions, marks the end of an exploration uptrend that began in 2017. The findings, reported across platforms like Mining.com and echoed in posts on X, underscore a growing reliance on older discoveries for reserve growth, raising concerns about the long-term sustainability of gold production amidst a sustained price rally.

This article delves into the factors behind the decline in gold exploration spending, the implications for the mining industry, and the broader economic and geopolitical context shaping these trends. It also critically examines the industry’s risk-averse approach and the potential for recovery as gold prices stabilize.

Declining Exploration Budgets: The Numbers Tell the Story

According to S&P Global’s estimates, global exploration spending for gold fell to $5.6 billion in 2024, a 7% decrease from the previous year, following a 15% drop in 2023. This contraction ended a six-year upward trend that saw exploration budgets rise from $4.31 billion in 2019 to $6.20 billion in 2021, fueled by a gold price bull run that began in 2019. Junior mining companies, which typically lead grassroots exploration efforts, bore the brunt of this decline, with their funding plummeting 21% to $1.8 billion in 2024. In contrast, major companies, backed by steady internal revenues, maintained spending on later-stage projects, highlighting a stark divide within the industry.

The share of grassroots or early-stage exploration within total budgets has also dwindled, reaching a historic low of 19% in 2024, compared to 50% in the mid-1990s. This shift reflects a broader trend of risk aversion, with companies increasingly focusing on known assets rather than untested areas. S&P Global notes that 56% of initial resource announcements between 2020 and 2024 came from existing projects, indicating a preference for lower-risk, incremental expansions over high-risk greenfield exploration.

The decline in exploration activity is further evidenced by S&P’s Pipeline Activity Index (PAI), which tracks drilling, financing, and project milestones. In the third quarter of 2024, the PAI dropped to 63, its lowest level since 2016, despite the Exploration Price Index (EPI) reaching a record high of 203, driven by soaring gold prices. This gap between high commodity prices and low exploration investment underscores a cautious approach among investors and companies, particularly juniors facing tighter financing conditions due to rising interest rates.

Why the Decline Amid High Gold Prices?

The paradox of declining exploration spending despite gold prices exceeding $2,700 per ounce in 2024 and stabilizing above $3,000 in 2025 is rooted in several interconnected factors:

1. Tight Financing for Junior Miners: Junior companies, which account for a significant portion of grassroots exploration, have faced severe capital constraints. Rising interest rates since 2022 have tightened financing markets, making it difficult for juniors to secure funding for high-risk ventures. As S&P analyst Mark Ferguson noted during a webinar, “When juniors are underfunded, the whole pipeline feels it.” This has led to a 21% drop in junior gold funding, limiting their ability to pursue new discoveries.

2. Risk Aversion in the Industry: The mining sector has become increasingly risk-averse over the past two decades, with companies prioritizing existing assets over speculative exploration. The decline in grassroots exploration to 19% of budgets reflects this shift, as firms focus on expanding known deposits rather than exploring untested regions. S&P Global highlights that the natural progression of assets from exploration to production partly explains this trend, but a broader reluctance to take risks is a significant driver.

3. Declining Quality of Discoveries: The quality of new gold discoveries has deteriorated, with the average size of deposits from 2020 to 2024 at 4.4 million ounces, down from 7.7 million ounces in the prior decade. None of the discoveries made in the past 10 years rank among the top 30 globally, signaling diminishing returns on exploration efforts. This trend discourages investment in new projects, as the potential rewards no longer justify the risks.

4. Focus on Critical Minerals: The global shift toward critical minerals like copper, lithium, and nickel, driven by the clean energy transition, has diverted exploration budgets from gold. S&P analysts note that critical minerals remain a “bright spot,” with sustained investor interest in securing supply chains for electrification and renewable energy. This shift has reduced the relative priority of gold exploration, even as prices rise.

Implications for the Gold Mining Industry

The decline in exploration spending has significant implications for the gold mining industry’s future. S&P Global’s database of gold discoveries reveals a troubling trend: only three new major discoveries were added in 2024, bringing the global inventory to 3 billion ounces across 353 deposits, a 3% increase from 2023’s 2.9 billion ounces. However, these additions were primarily older discoveries that recently met the 2-million-ounce threshold for “major” status, with no new major discoveries reported in the 2023–24 period. Since 2020, only six major discoveries have been made, contributing just 27 million ounces to reserves and resources.

This reliance on legacy deposits raises concerns about the industry’s ability to sustain production growth. Global gold mine output has plateaued since 2018, with 2023 production at 3,661 metric tons, only marginally higher than the 2018 record. The World Gold Council warned in 2022 that production is “close to plateauing,” with analysts like Paul Manalo of S&P Global projecting a potential peak in gold supply by 2026. The dwindling number of new deposits—132 in the 1990s, 93 in the 2000s, and just 25 in the 2010s—further underscores the challenge, with no major discoveries in the past three years.

The lack of new discoveries could exacerbate supply constraints, particularly as demand for gold remains robust. Central banks have continued to bolster gold reserves, though net buying slowed to 12 tons in April 2025 due to sales by Uzbekistan. Investment demand, critical for price growth, is projected to drive gold prices to $4,000 per ounce by late 2025 or early 2026, according to Bank of America, provided demand rises 18% year-over-year. However, without increased exploration, the industry risks failing to meet this demand, potentially driving prices higher but limiting production capacity.

Geopolitical and Economic Context

The decline in gold exploration spending must be viewed in the context of broader economic and geopolitical trends. Rising interest rates since 2022 have squeezed financing for junior miners, while inflationary pressures and geopolitical tensions, including Russia’s invasion of Ukraine and trade disputes, have supported gold prices as a safe-haven asset. However, these high prices have not translated into increased exploration, as investors remain cautious amid economic uncertainty.

The focus on critical minerals, driven by the global energy transition, has also shifted priorities. S&P analysts highlight resilience in critical minerals like copper and lithium, with U.S. exploration spending rising due to policies like the Inflation Reduction Act, while Australia, a hub for junior explorers, has seen significant budget cuts. This divergence underscores regional disparities, with juniors in Australia struggling to secure capital, while U.S. investments in critical minerals buffer declines in gold exploration.

Critical Perspective: Opportunities and Risks

S&P Global’s analysis suggests that stabilizing gold prices above $3,000 per ounce could spur renewed interest in exploration, but several risks remain. The industry’s risk-averse approach, while prudent in the short term, may hinder long-term growth by limiting new discoveries. The reliance on older deposits and the declining quality of new finds indicate a structural challenge that increased budgets alone may not solve. As S&P notes, “Even an increase in exploration spending may not contribute to increased discovery rates, given that the industry has been reluctant to allocate funds to untested areas.”

The shift toward critical minerals presents both opportunities and challenges. While demand for copper, lithium, and nickel is rising, diverting resources from gold exploration could exacerbate supply constraints if gold demand continues to outpace production. Moreover, the financial struggles of junior miners highlight a systemic issue: the industry’s dependence on smaller, risk-tolerant companies for grassroots exploration is at odds with a tightening capital market.

Geopolitically, policies like those proposed by U.S. President-elect Donald Trump, including streamlined regulations and tariffs on Chinese imports, could influence global exploration trends. However, S&P analysts caution that these changes may not significantly ease financing constraints for juniors, potentially limiting exploration budgets in 2025. The cautious investment landscape, coupled with conservative investor sentiment, suggests that the gold mining sector’s resilience is being tested.

A Call for Strategic Reinvestment

S&P Global’s findings highlight a critical juncture for the gold mining industry. The decline in exploration spending, despite soaring gold prices, reflects a combination of financial constraints, risk aversion, and shifting priorities toward critical minerals. While major companies continue to leverage existing assets, the underfunding of junior miners threatens the pipeline of new discoveries, raising concerns about future supply sustainability.

As gold prices stabilize and demand remains strong, the industry has an opportunity to recalibrate its approach. Increased investment in grassroots exploration, coupled with technological advancements in mining and processing, could reverse the downward trend in discoveries. However, this requires addressing the financing challenges faced by juniors and fostering a more balanced approach to risk. As one X post noted, “The #Gold mining sector continues to rely on older discoveries for reserve growth despite a sustained gold price rally,” underscoring the urgency of strategic reinvestment.

For now, the gold mining industry faces a delicate balancing act: capitalizing on high prices while ensuring long-term production capacity. The path forward demands innovation, collaboration, and a renewed commitment to exploration to secure the sector’s future in a dynamic global market.