The world’s biggest mining groups have cut back spending on exploration in the past two years as inflation, higher interest rates and lower commodity prices have stalled the market.

That has come in spite of a flurry of spending this decade on the search for copper and lithium, metals crucial for the energy transition.

Total exploration spending fell for the second consecutive year in 2024, sliding 6 per cent to $12.5bn, after rising in the years following the pandemic, according to S&P Capital IQ.

Yet investment in lithium exploration has risen every year since 2020, and had jumped 360 per cent to $1.1bn in 2024 compared with four years previously.

Spending on the search for copper has risen by half over the same time period, although the $3.2bn investment in 2024 was marginally lower than the year before.

Demand for battery and base metals, which are used in a broad range of products including copper wiring and electric car batteries, is expected to jump over the next decade. Analysts have warned of looming supply crunches. There is now a glut of lithium supplies, forcing down prices.

Exploration spending last year was “far worse” than it had been during the commodities boom more than a decade ago, said Kevin Murphy, director of metals & mining research at S&P Global Commodity Insights.

He said inflation, tighter monetary policy and weak commodity markets had contributed to “caution from the majors”. In tougher conditions, exploration is “one of the first things that goes”.

Gold attracted the most exploration money last year, at $5.6bn of the total, more than 40 per cent. Combined spending on copper, lithium and nickel — the next most invested metals last year — rose to almost 40 per cent of the 2024 total compared with 27 per cent in 2020.

The data, adjusted for inflation, includes grassroots investment — spending on the search for minerals in areas not explored or drilled before — feasibility studies and cash deployed to develop existing mines.

Duncan Wanblad, chief executive of Anglo American, told the Financial Times in February that the miner was “predominantly” carrying out exploration in copper.

“The world has really underinvested in exploration for a very long time,” he said. The FTSE 100 group is offloading a number of businesses to focus on copper and iron ore.

Kwasi Ampofo, head of metals and mining at BloombergNEF, said there was “a lot of herd mentality in exploration”. At present, “you’re likely to fill a room if you’re talking about finding the next big copper deposit”.

Much of last year’s money went towards developing new sites at existing mines rather than into greenfield exploration, the search for new resources on undeveloped land.

Greenfield exploration was “a challenge” because investors “were not necessarily thinking 30 years ahead,” said Ciara Talbot, head of exploration at Vale Base Metals. “In the mining business you’re looking quarter to quarter and looking to see production numbers.”

However, that “has to change at some point, there’s only so much you can explore at existing mines”.

Mining has become more expensive as the concentrations of metal in the ground have reduced over time and inflation has pushed up costs, analysts said. The challenges made acquiring sites rather than exploring for reserves more attractive, they added.

“There’s a lot of incentive to go through the M&A route” in order to grow, said S&P’s Murphy. But mergers often resulted in smaller combined exploration budgets because the new company had to “sort out what they consider a priority, and a bunch of things drop off”, he said.

Anglo-Australian group Rio Tinto, Newmont of the US and Canada’s Barrick Gold have consistently been among the companies investing most annually, according to S&P.

The data includes precious and base metals but excludes iron ore, coal, aluminium, oil and gas.