Exploration funds move southward

Gold companies in the U.S. are moving large portions of their exploration budgets to Latin America, where government leaders are actively revising mining laws to attract foreign investment, according to a new study published by The Gold Institute of Washington, D.C.

The Search for Gold: U.S. Producers Look Abroad details the decline in U.S. exploration spending, which dropped to US$149 million in 1992 from US$170 million in 1989. During the same period, Latin American exploration more than doubled, to US$35 million from US$14 million.

In 1989, U.S. producers spent 71% of their total exploration budgets within their own country, the study says, but by 1992 that percentage dropped to 63%. Four reasons are outlined for this shift: availability of mineral resources, lessening of political risk in Latin America, rising political risk in the U.S., and mining investment promotion.

“The study highlights the stark contrast between Latin American leaders, now disbanding mining codes that keep foreign investment out, and U.S. lawmakers who have introduced legislation to establish new taxes and a host of mining regulations that would severely curtail new investment in the U.S. gold industry,” said Michael Brown, the Institute’s vice-president of public affairs.

According to the study, Mexico posted the most dramatic gains in exploration investment. Government leaders there abolished the 7% mining tax in 1991 as an inducement for investment. U.S. gold producers increased mining exploration spending in Mexico to US$12 million in 1992 from US$500,000 in 1989.