A sharp rebound in mine exploration spending shows no sign of slowing this year, but miners seeking fresh supplies are keenly aware of risks and not every country with rich mineral deposits is a winner.
Even with metals prices at record highs, mining and exploration companies have become pickier about where they dig and countries must offer incentives to persuade companies to sink millions of dollars in drilling and feasibility studies.
Despite increases in most countries, the industry's overall appetite for risk has not returned to levels seen prior to the economic downturn, said Jason Goulden, head of research for MEG, a metals and mining consultancy group.
Resource-rich countries like South Africa and the Democratic Republic of Congo tumbled in a recent Fraser Institute study ranking world's mining jurisdictions, and a poll of mining companies highlights a lack of guarantees over land ownership as an area of increasing concern.
Conversely, Colombia - boasting relative stability after years of conflict - rose in the rankings.
Still, the overall trend in exploration spending is decidedly bullish, according to a report the Metals Economics Group published in conjunction with the big PDAC mining convention in Toronto this week. Global nonferrous spending jumped 45 percent in 2010 to over $11.2 billion.
Spending is expected to hit record highs in 2011, mostly because accelerating demand is depleting reserves, and companies need replacements.
Goulden, who wrote the report, believes the current trajectory on metal prices and increasing competition for drilling and engineering resources mean bigger exploration budgets in 2011 are inevitable.
The report says many jurisdictions have erected new hurdles that discourage investment, including nationalistic approaches, windfall taxes, resource rent taxes and higher royalties.
That has encouraged companies to spend their exploration dollars in places that offer predictability and better assurances of steady, long-term gains.
Goulden said exploration in a number of countries considered to be high risk continued to fall in 2010, while other countries with elevated risk profiles showed modest increases that were far below the global average.
Early-stage exploration, which is the most mobile and tends to be cut first when risk levels rise, has all but dried up in many high-risk countries, he said. The explorers that remain are focused on advanced projects and mines that are difficult to abandon.
Bruce Shapiro, president of MineAfrica, which promotes investment in Africa, described the dynamic: Money has absolutely no conscience, he said. It will go wherever it gets the least aggravation and the best return on investment.
But the company expects much of that growth in regions outside its traditional mining strongholds, more evidence that the recovery in exploration has been uneven in terms of geography.
The majority of drilling is Canada, the U.S. and Australia and it has been so for years, said Chief Executive Craig Kipp. But most of the resource companies that we are now dealing with are heading toward South America and Africa.
Australia's Resolute Mining
Generally in Africa, because you're going over this ground the first time, you do have a better chance perhaps of finding ore bodies. But equally with that advantage comes the risk that you might find yourself in a more unstable country, said Sullivan, who is in Toronto for the PDAC convention.
The mood at this year's event, where explorers show off their projects and mining majors shop for assets, is buoyant thanks to record or near-record prices for a range of metals.
We expect another healthy increase in the 2011 exploration budget total relative to 2010, rising to set a new high-water mark for worldwide nonferrous exploration spending, said MEC's Goulden, adding that increasing oil and material costs would also drive costs higher.
Indeed, Boart said its drilling services are fast approaching full capacity.
We are moving toward full utilization, said CEO Kipp. We are busy and the market looks very good.
(Additional reporting by Julie Gordon; Editing by Frank McGurty and Janet Guttsman)