Using exploration expenditures to assess the climate for mineral investment

Countries that rely on private investors to find and exploit their mineral resources need reliable indicators of their investment attractiveness. This study explores the use of exploration expenditures for this purpose, focusing primarily on Chile. It finds that exploration expenditures can provide useful insights into both the level and trends in investment attractiveness for individual mineral producing countries. However, for various reasons, it is a country's share of grassroots exploration expenditures for specific metals, rather than its share of total world exploration, that most directly and immediately reflects investment climate. Over the current decade, Chile's shares of world grassroots exploration for gold and (more recently and more modestly) for base metals have fallen, suggesting a deterioration in the country's investment climate for these mineral commodities. The declines, however, are less dramatic than the country's falling share of total world exploration suggests. The study concludes by briefly examining the levels and trends in investment climate for the more important mining countries. Among other trends it finds that Canada and Australia continue to enjoy a high level of attractiveness despite the efforts of many developing countries in recent years to increase private investment in their mineral sectors.