Challenges of Exploring UnderDeep Cover
Richard SchoddeManaging Director, MinEx ConsultingAdjunct Professor, Centre of Exploration Targeting, University of Western Australia
AMIRA International’s11th Biennial Exploration Managers Conference28th – 31st March 2017, Healesville Australia
Overview
1. Long term trends in exploration… what did we spend & what did we find?
2. Factors behind the recent decline in discoveryperformance
3. Industry behaviour over the last business cycle
4. Long term trends in the depth of cover
5. Deep discoveries made since 2000
6. Discovery methods used
7. Conclusions
2
1. LONG TERM TRENDSIN EXPLORATION
In spite of the massive boom in expenditures in 2002-12discovery rates did not increase
3
Exploration expenditures: Worldby Commodity : 1975-2016
$0
$5
$10
$15
$20
$25
$30
$35
1975 1980 1985 1990 1995 2000 2005 2010 2015
Other
Coal
Iron Ore
Diamonds
Uranium
Base Metals
Gold
2016 US$ billion $33Bin 2012
$3Bin 2002
11x real increasein the last decade
$10.2Bin 2016
Spend reached an all-time high in 2012
Spend reached an all-time high in 2012
69% fall in thelast 4 years
4
Sources: MinEx Consulting estimates © March 2017, based on datafrom ABS, NRCan, MLR (China), OECD andSNL Metals & Mining data, an offering of S&P Global Market Intelligence
Number of discoveries by sizeMineral discoveries in the World : All Commodities : 1950-2016
0
50
100
150
200
1950 1960 1970 1980 1990 2000 2010
Moderate
Major
Giant
Number
808
5234
1899
2527
Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8 , > 10Mt Fe, >20Mt Thermal Coal“Major” >1Moz Au, >100kt Ni, >1Mt Cu, 2.5Mt Zn+Pb, >25kt U3O8 , >100Mt Fe, >200Mt Thermal Coal“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu, 12Mt Zn+Pb, >125kt U3O8 . >500Mt Fe, >1000Mt Thermal Coal
Need to factorin unreporteddiscoveries for
recent years
Need to factorin unreporteddiscoveries for
recent years
Caution:Incomplete datain recent years
Source: MinEx Consulting © March 2017
Historically ~70-80deposits were
found each yearin the World
Historically ~70-80deposits were
found each yearin the World
Peaked at 149discoveries in
2007
Peaked at 149discoveries in
2007
5
Collapse in thediscovery rate?
Number of discoveries by sizeMineral discoveries in the World : All Commodities : 1950-2016
0
50
100
150
200
1950 1960 1970 1980 1990 2000 2010
Est Unreported
Moderate
Major
Giant
Number
808
5234
1899
2527
Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8 , > 10Mt Fe, >20Mt Thermal Coal“Major” >1Moz Au, >100kt Ni, >1Mt Cu, 2.5Mt Zn+Pb, >25kt U3O8 , >100Mt Fe, >200Mt Thermal Coal“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu, 12Mt Zn+Pb, >125kt U3O8 . >500Mt Fe, >1000Mt Thermal Coal
MinEx’s adjustmentfactor for unreported
discoveries
MinEx’s adjustmentfactor for unreported
discoveries
240
Source: MinEx Consulting © March 2017
6
Even after factoringthis in, the discovery
rate is still down
Even after factoringthis in, the discovery
rate is still down
Number of discoveries versus expendituresMineral discoveries in the World : All Commodities : 1950-2016
$0
$5
$10
$15
$20
$25
$30
$35
0
50
100
150
200
1950 1960 1970 1980 1990 2000 2010
Est Unreported
Discoveries
Expenditures
Number
Note: Discoveries based on deposits >=“Moderate” in sizei.e. >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8 , > 10Mt Fe, >20Mt Thermal Coal
No World exploration data prior to 1975Source: MinEx Consulting © March 2017
Expenditures (2016 US$b)
7
Even after adjusting forunreported discoveries, over
the last decade, expendituresoutpaced the number of
deposits found
Even after adjusting forunreported discoveries, over
the last decade, expendituresoutpaced the number of
deposits found
$0
$100
$200
$300
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Discovery costs are risingUnit cost per for a moderate-sized gold or base metal discovery in the World
Average Cost per Discovery (2016 US$m)
$0
$100
$200
$300
$400
$500
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Unit discoverycosts have
tripled in thelast decade
Unit discoverycosts have
tripled in thelast decade
Note: Discoveries are for deposits >0.1 Moz Au or >0.1 Mt Cu-eqData from 2007 onwards have been adjusted for unreported deposits
Source: MinEx Consulting © March 2017
$632m
~$200mWeighted Average for1990-99 = $60mWeighted Average for
1980-89 = $47m
Weighted Average for2000-09 = $80m
Estimated
Estimated
Weighted Average for1990-99 = $60m
Weighted Average for2000-09 = $106m
Weighted Average for1980-89 = $64m
~$300m
8
$0
$100
$200
$300
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
The unit value of discovery varies over timeEstimated NPV per Gold or Base Metal discovery in the World
Average Value per Discovery (2016 US$)
$0
$100
$200
$300
$400
$500
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
The averagevalue/quality ofgold discoverieshas been falling
over time
The averagevalue/quality ofgold discoverieshas been falling
over time
Note: Discovery values are indicative only, and based on rolling 3-year averageData from 2007 onwards have been adjusted for unreported deposits
Source: MinEx Consulting © March 2017
$632m
Weighted Average for1990-99 = $173mWeighted Average for
1980-89 = $134m
~$90m
Weighted Average for2000-09 = $134m
Estimated
Estimated
Weighted Average for1990-99 = $160m
Weighted Average for2000-09 = $165m
Weighted Average for1980-89 = $104m ~$150m
The averagevalue/quality of
base metaldiscoveries has
remained constant
The averagevalue/quality of
base metaldiscoveries has
remained constant
9
Estimated value of discoveries versus expendituresMineral discoveries in the World : All Commodities : 1950-2016
$0
$10
$20
$30
$40
1950 1960 1970 1980 1990 2000 2010
Est Unreported Value
Value of Discoveries
Expenditures
Caution: Values are indicative / approximate-onlyNo World exploration expenditure data prior to 1975
Source: MinEx Consulting © March 2017
2016 US$ billionOver the last decade theexploration industry has
moved from creating wealthto destroying wealth
Over the last decade theexploration industry has
moved from creating wealthto destroying wealth
Caution:Incomplete datain recent years
10
This situationshould improve
over time asdiscoveries are
drilled-out
This situationshould improve
over time asdiscoveries are
drilled-out
2. FACTORS CAUSING THE RECENT DECLINEIN EXPLORATION PERFORMANCE
Industry is affected by structural and cyclical factors
11
Key Drivers for exploration
• Changes in commodity prices & exchange rates
– Drives the overall size of the exploration budget
• Changes in input costs
– Land access, offices & admin, geologists, drillers and community relations
• Fixed/Variable costs of running an exploration team
– During downtimes, field work (and drilling) gets cut proportionately more
• Major new discoveries / commodity types / change in country risk
– Success brings in new players (changes in risk/reward perception)
• New geological concepts and exploration tools
– Potential to be more efficient and effective
• Increasing depth of cover
– Technical risk increases and it is more expensive to explore
Some factors arecyclical, others are
structural
Some factors arecyclical, others are
structural
structuralstructural
12
3. INDUSTRY BEHAVIOUR OVER THELAST BUSINESS CYCLE
The move from boom to bust (and back again) impacts on ourdiscovery rate and performance
13
Change in the level of exploration activitiesCanada + Australia : 2000-2016
0
1
2
3
4
5
6
7
8
2000 2002 2004 2006 2008 2010 2012 2014 2016
Number of Active Explorn Companies
Number of Active Explorn Projects
Total Expenditures
Metres Drilled
Change in ActivityNormalised to Year 2002 = 1
Source: Analysis by MinEx Consulting © March 2017based on data from ABS, NRCan and SNL
Note: Excludes exploration and discoveries for Bulk MineralsDiscovery rate is based on deposits >=“Moderate” in sizeAll costs are reported in constant 2016 US$
From 2002 to 2012 the number of exploration companies rose by 2.5xthe number of exploration projects by 2.9x and total expenditures
(in constant $) by 7.0x, but metres drilled only went up 2.6x
From 2002 to 2012 the number of exploration companies rose by 2.5xthe number of exploration projects by 2.9x and total expenditures
(in constant $) by 7.0x, but metres drilled only went up 2.6x
14
Change in the level of exploration activitiesCanada + Australia : 2000-2016
0
1
2
3
4
5
6
7
8
2000 2002 2004 2006 2008 2010 2012 2014 2016
Discoveries made
Number of Active Explorn Companies
Number of Active Explorn Projects
Total Expenditures
Metres Drilled
Change in ActivityNormalised to Year 2002 = 1
Source: Analysis by MinEx Consulting © March 2017based on data from ABS, NRCan andSNL Metals & Mining data, an offering of S&P Global Market Intelligence
From 2002 to 2012 the number of exploration companies rose by 2.5xthe number of exploration projects by 2.9x and total expenditures
(in constant $) by 7.0x, but metres drilled only went up 2.6x
From 2002 to 2012 the number of exploration companies rose by 2.5xthe number of exploration projects by 2.9x and total expenditures
(in constant $) by 7.0x, but metres drilled only went up 2.6x
.. and the number of discoveries by only 2.4x
The rate ofdiscovery was bestin the early part of
the boom
The rate ofdiscovery was bestin the early part of
the boom
15
Note: Excludes exploration and discoveries for Bulk MineralsDiscovery rate is based on deposits >=“Moderate” in sizeAll costs are reported in constant 2016 US$
Change in the level of exploration activities per projectCanada + Australia : 2000-2016
0
1
2
3
2000 2002 2004 2006 2008 2010 2012 2014 2016
Discovery Rate per Project
Number of Active Projects per Company
Total Expenditures per Project
Metres Drilled per Project
Change in ActivityNormalised to Year 2002 = 1
Source: Analysis of 2602 companies by MinEx Consulting © March 2017based on data from ABS, NRCan andSNL Metals & Mining data, an offering of S&P Global Market Intelligence
Note: Includes Greenfield and Brownfield explorationExcludes exploration and discoveries for Bulk MineralsDiscovery rate is based on deposits >=“Moderate” in size
16
For most of the period the discovery rate per project remained fairlyconstant (if anything it was better in the early-part of the up-cycle).
In the down cycle, companies pruned back their portfolio of projectsand spend per project, but also pruned back on the level of drilling
For most of the period the discovery rate per project remained fairlyconstant (if anything it was better in the early-part of the up-cycle).
In the down cycle, companies pruned back their portfolio of projectsand spend per project, but also pruned back on the level of drilling
Success rates aredriven more by thelevel of drilling than
total spend
Success rates aredriven more by thelevel of drilling than
total spend
0.82
2.42
0.90
1.15
1.51
0.95
0.95
0.66
1.60
1.29
Change in level of explorn activities per greenfield projectCanada + Australia : 2000-2016
0
1
2
3
2000 2002 2004 2006 2008 2010 2012 2014 2016
Discovery Rate per Project
Number of Active Projects per Company
Total Expenditures per Project
Metres Drilled per Project
Change in ActivityNormalised to Year 2002 = 1
Caution: approximate onlyNote: Excludes exploration and discoveries for Bulk Minerals
Discovery rate is based on deposits >=“Moderate” in size
17
The discovery rate per project was bestduring the early part of the up-cycle.
The discovery rate per project was bestduring the early part of the up-cycle.
Success rates forgreenfield
exploration areinfluenced by
project qualityand the amount
of drilling
Success rates forgreenfield
exploration areinfluenced by
project qualityand the amount
of drilling
1.39
1.59
0.55
1.17 1.10
1.00
0.56
0.44
Source: Analysis of 2602 companies by MinEx Consulting © March 2017based on data from ABS, NRCan andSNL Metals & Mining data, an offering of S&P Global Market Intelligence
1.00
1.321.15 0.82
1.36
1.81
Projects in 2016 have 1.10x level ofspend to that of 2002, but only 0.56xthe amount of drilling … and the unitdiscovery rate is 0.44x that of 2002.
Projects in 2016 have 1.10x level ofspend to that of 2002, but only 0.56xthe amount of drilling … and the unitdiscovery rate is 0.44x that of 2002.
0.65 0.35
1.040.59 0.76 1.00 0.92 0.98 0.86 0.77 1.04 0.98 0.72 1.03 0.39
Keys learnings
• Discovery performance is best in the first couple yearsof the up-cycle
• At the top of the cycle, companies tend to take onmarginal projects and lose control of costs
• In the down-cycle companies need to quickly restructuretheir business to get the fixed/variable costs back in-balance
• Exploration success is driven by good ideas (andeconomic targets) and a healthy drilling budget
18
4. LONG TERM TRENDS IN DEPTH OFCOVER
The challenge of exploring under deeper cover is a “slow-burn”story that will only get tougher over time.
19
Depth of cover versus discovery year:Gold and Base Metal discoveries in the World : 1900-2016
Source: MinEx Consulting © March 2017
Industry isprogressivelylooking underdeeper cover
over time
Industry isprogressivelylooking underdeeper cover
over time
Depth (Metres)
20
Such depositsare harder to find
… but this is a“slow-burn” storyand doesn’texplain the rapiddecline in recentperformanceN = 2926
Note: Size of the bubble refers to Moderate, Major and Giant discoveriesExcludes satellite deposits within existing camps. Analysis excludes Nickel laterites and under-sea deposits
-500
0
500
1000
1500
2000
2500
3000
1900 1920 1940 1960 1980 2000 2020
Base Metals
Gold
Gold - South Africa
Depth of cover versus discovery year:Gold discoveries in the World : 1900-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
21
N = 1743
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 615 deposits with no information on depth of cover.Excludes satellite deposits within existing camps.
-500
0
500
1000
1500
2000
2500
3000
1900 1920 1940 1960 1980 2000 2020
Gold
Gold - South Africa
Depth of cover versus discovery year:Base Metal discoveries in the World : 1900-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
22
N = 1183
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 383 deposits with no information on depth of cover.Excludes satellite deposits within existing camps. Analysis excludes Nickel laterites and under-sea deposits.
-500
0
500
1000
1500
2000
2500
3000
1900 1920 1940 1960 1980 2000 2020
Base Metals
Depth of cover versus discovery year:Base Metal discoveries in the World : Greenfield vs Brownfield 1900-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
23
278
905
N = 1183
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 383 deposits with no information on depth of cover.Excludes satellite deposits within existing camps. Analysis excludes Nickel laterites and under-sea deposits.
GF discoveries inthe KupferschieferBelt in Poland
Industry is moreeffective at
exploring underdeep cover for
Base Metals than itis for Gold
Industry is moreeffective at
exploring underdeep cover for
Base Metals than itis for Gold
-500
0
500
1000
1500
2000
2500
3000
1900 1920 1940 1960 1980 2000 2020
Base Metals - Brownfield
Base Metals - Greenfield
Depth of cover versus discovery year:Gold discoveries in the World : Greenfield vs Brownfield : 1900-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
24
N = 1743
367
57
1319
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 615 deposits with no information on depth of cover.Excludes satellite deposits within existing camps.
Greenfieldsexploration for gold is
still stuck at the“shallow-end” of the
swimming pool
Greenfieldsexploration for gold is
still stuck at the“shallow-end” of the
swimming pool
-500
0
500
1000
1500
2000
2500
3000
1900 1920 1940 1960 1980 2000 2020
Gold - Brownfield
Gold - Greenfield
South Africa
Depth of cover has been slowly increasing over timeWeighted average depth of cover for primary gold discoveries in the World
16 12 13 11 8 1118
717
28
7889
124
159
13 13 1724 28
41
60
0
50
100
150
200
1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-16
Greenfield
Brownfield
Average
Depth of Cover (Metres)
Note: Excludes South Africa
72% 83% 77% 80% 76% 74% 71%
28% 17% 23% 20% 24% 26% 29%
0%
50%
100%Percentage Share (G/F versus B/F)
Source: MinEx Consulting © March 2017
25
Depth of cover has been slowly increasing over timeWeighted average depth of cover for base metal discoveries in the World
30 36 4567
3856
99
155141
114
202
239
129
379
57 59 57
9978 78
190
0
50
100
150
200
250
300
350
400
1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-16
Greenfield
Brownfield
Average
Depth of Cover (Metres)
79% 78% 82% 76% 77% 70% 68%
21% 22% 18% 24% 23% 30% 32%
0%
50%
100%Percentage Share (G/F versus B/F)
# Note: Excludes 9 very deep (and uneconomic) greenfield discoveries in 1990s on extensions to the Kupferschiefer Belt in Poland.Including them increases the average Greenfield depth to 203m and average total to 211m
Source: MinEx Consulting © March 2017
#
26
0
100
200
300
400
500
0% 25% 50% 75% 100%
Cumulative Number
0
100
200
300
400
500
0% 25% 50% 75% 100%
Cumulative Number
77%
91%
91%
95%
95%
18% of allgreenfielddiscoveries
outcrop
18% of allgreenfielddiscoveries
outcrop
14%
33%
38%
67%
76%
Average depthis 99 metres
Average depthis 99 metres
Note: Based on 44 greenfield and 21 brownfield discoveries.Excludes Nickel Laterite deposits and Undersea Deposits
Depth of Cover (Metres) Depth of Cover (Metres)
5% of allbrownfielddiscoveries
outcrop
5% of allbrownfielddiscoveries
outcrop
Average depthis 379 metres
Average depthis 379 metres
GREENFIELD BROWNFIELD
Have a wide range of depths for Base MetalsDepth of cover for base metal deposits > 0.1 Mt-Cu equivalent found in the World: 2010-16
Source: MinEx Consulting © March 2017
27
0
100
200
300
400
500
0% 25% 50% 75% 100%
Cumulative Number
Most gold discoveries are still being made at (or near) surfaceDepth of cover for gold deposits > 0.1 Moz found in the World: 2010-16
0
100
200
300
400
500
0% 25% 50% 75% 100%
Cumulative Number
96%
98%
99%
99%
54% of allgreenfielddiscoveries
outcrop
54% of allgreenfielddiscoveries
outcrop
67%
77%
85%
88%
90%
Average depthis 18 metres
Average depthis 18 metres
Note: Based on 115 greenfield and 48 brownfield discoveries.Excludes South Africa
Depth of Cover (Metres) Depth of Cover (Metres)
31% of allbrownfielddiscoveries
outcrop
31% of allbrownfielddiscoveries
outcrop
Average depthis 159 metres
Average depthis 159 metres
GREENFIELD BROWNFIELD
Source: MinEx Consulting © March 2017
28
5. DEEP DISCOVERIES MADESINCE 2000
Between 2000-16, out of the 800+ gold and base metal discoveriesmade in the World, only 21 were >500 metres deep
29
-500
0
500
1000
1500
2000
2000 2005 2010 2015 2020
Gold - Brownfield
Gold - Greenfield
Depth of cover versus discovery year:Gold discoveries in the World : Greenfield vs Brownfield : 2000-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
30
N = 470
130
340
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 100 deposits with no information on depth of cover. Excludes South AfricaExcludes satellite deposits within existing camps..
Since 2000, only 12 golddeposits (out of 469)
found in the World weredeeper than 500 metres
Since 2000, only 12 golddeposits (out of 469)
found in the World weredeeper than 500 metres
… and all of themwere brownfield
Pinson Deeps(530m)
Ren (840m)
Lalor Lake(782m)
SizhuangDeeps (1200m)
Cochenour(800m)
Vogue(700m)
Matang Deeps(1500m)
Jiaojia Deeps(1000m)
Haiyu(1250m)
Federation(1000m)
Liberator(1000m)
Fourmile(670m)
-500
0
500
1000
1500
2000
2000 2005 2010 2015 2020
Base Metals - Brownfield
Base Metals - Greenfield
Depth of cover versus discovery year:Base Metal discoveries in the World : Greenfield vs Brownfield 2000-2016
Source: MinEx Consulting © March 2017
Depth (Metres)
31
165
74
N = 239
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 69 deposits with no information on depth of cover.Excludes satellite deposits within existing camps. Analysis excludes Nickel laterites and under-sea deposits.
Since 2000, only 9 basemetal deposits (out of 239)
found in the World weredeeper than 500 metres
Since 2000, only 9 basemetal deposits (out of 239)
found in the World weredeeper than 500 metres
… and 7 of thesewere brownfield
Resolution(Cu:1750m)
Gaworzyce-Radwanice(Cu: 1200m)
Kemess East (Cu: 825m)
South Miitel(Ni: 600m)
Rook (Ni: 870m)
Khamsin (Cu: 550m)
Semblana(Cu: 880m) Teena (Zn: 796m)
Weisswasser(Cu:1050m)
Depth of cover for Base Metal discoveries : 2000-16
Source: MinEx Consulting © March 2017
N = 239
Outcropping
200-500m
100-200m
1-100m
>500 metres
GiantMajorModerate
Resolution(Cu:1750m)
Gaworzyce-Radwanice(Cu: 1200m)
Kemess East(Cu: 825m)
South Miitel(Ni: 600m)
Rook(Ni: 870m)
Khamsin(Cu: 550m)
Semblana(Cu: 880m)
Teena(Zn: 796m)
Weisswasser(Cu:1050m)
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.Excludes 69 deposits with no information on depth of cover.Excludes satellite deposits within existing camps. Analysis excludes Nickel laterites and under-sea deposits.
32
N = 470
Outcropping
200-500m
100-200m
1-100m
>500 metres
GiantMajorModerate
Pinson Deeps(530m)
Ren (840m)
Lalor Lake (782m)
Sizhuang Deeps (1200m)
Cochenour (800m)
Vogue(700m)
Matang Deeps (1500m)
Jiaojia Deeps (1000m)
Haiyu (1250m)
Federation(1000m)
Liberator(1000m)
Fourmile(670m)
Mangalisa (776m)
Robijn (2000m)
Depth of cover for Gold discoveries : 2000-16
Note: Size of the bubble refers to Moderate, Major and Giant discoveries.For completeness have included South Africa. Excludes 99 deposits with no information on depth of cover.Excludes satellite deposits within existing camps.
The very deep discoveries areall clustered in a handful of
established districts
The very deep discoveries areall clustered in a handful of
established districts
Source: MinEx Consulting © March 2017
33
6. DISCOVERY METHODS USED
A wide range of exploration tools and techniques are available.Their effectiveness varies by commodity type and depth of cover
34
Trends in exploration methods
The preferred search method used varies by commodity type, depth
of cover and “scale”
Continental-Scale
Province-Scale
District-Scale
Project-Scale
Prospect-ScaleMinEx has carried out a detailedanalysis of the discovery history of 559
gold and base metal deposit found inthe World at these two scales
MinEx has carried out a detailedanalysis of the discovery history of 559
gold and base metal deposit found inthe World at these two scales
35
195
92
28
19
17
25
0 metres
1-25 metres
26-50 metres
51-100 metres
101-200 metres
>200 metres
2.15
3.24
3.16
4.35
2.36
3.21
Number Average Size(Moz Au)
Discovery MethodDISTRICT-SCALE DRILL TARGET
As methods become lesseffective switch from
Geochem to GPx then todrilling (sole method)
As methods become lesseffective switch from
Geochem to GPx then todrilling (sole method)
Source: MinEx Consulting © March 2017
Discovery method changes with depthPrimary gold discoveries >0.1 Moz in World: 2000-2016
36
Discovery method changes with depthPrimary base metal discoveries >0.1 Mt Eq in World: 2000-2016
31
81
20
18
24
9
0 metres
1-25 metres
26-50 metres
51-100 metres
101-200 metres
>200 metres
1.22
3.41
1.11
1.69
5.93
3.73
Number Average Size(Mt Cu-eq)
Discovery MethodDISTRICT-SCALE DRILL TARGET
As methods become lesseffective switch from
Geochem to GPx then todrilling (sole method)
As methods become lesseffective switch from
Geochem to GPx then todrilling (sole method)
Source: MinEx Consulting © March 2017
37
5. CONCLUSIONS
38
Conclusions [1/4]
• Global exploration expenditures (for bulks and non-ferrous) reached anall-time high in 2012 (of US$33 billion). In the 4 years since then it hasdropped by 69% to $10.2 billion
– Gold continues to be the main target (39%) followed by base metals (29%)and bulk minerals (14%).
• Historically, ~70-80 Moderate-sized (or larger) deposits were foundeach year in the World. This peaked at 149 discoveries in 2007 andhas fallen dramatically since then
– However, we need to remember that it does take time for discoveries to bereported and fully-drilled out
• Over the last decade, due to a massive increase in spend and only modestincrease in the number of deposits found, industry performance declined
– Average cost per discovery went up 3x. It currently costs ~$200m to find a golddeposit and $300m for a base metal deposit. Challenge is that these depositsare (on average) only worth $90m and $150m respectively.
39
Conclusions [2/4]
• The recent decline in driven by a combination of cyclical and structuralfactors. These include:
– Higher commodity prices led to a boom in exploration – but it led to a doubling inthe cost of running an office, hiring a geologist and drilling a hole.
– The subsequent bust has resulted in lower input costs, but companies had goneinto hibernation – resulting in very little fieldwork (and discoveries)
– Discovery performance is best in the first 2 years of an up-turn … as companies re-activate their (best) projects.
• The move to exploring under progressively deeper cover is a slow-burn story
– It only partially explains the recent poor performance for the industry.
– The depth of cover issue varies by commodity and brownfield/greenfield andlocation (it’s not an issue in Africa)
– For Australia and Canada the issue will only get worse over time
40
Conclusions [3/4]
• Simply focussing on the trend in the average depth of cover, can give amisleading impression of the challenge
– In 2010-16 the average depth of cover for new gold and base metal discoverieswas 60 metres. However this was made up of greenfield discoveries (at 18m) andbrownfield discoveries (at 159m)
– Over the last decade 54% of all greenfield discoveries made in the World wereoutcropping, and 96% were less than 100 metres.
– Over period 2000-16, only 12 gold discoveries (out of 570) were >500 metres. Allof these were brownfield targets in mature districts
– For base metals, over the last decade, only 9 (out of 308) were >500 metres. Onlytwo of these were greenfields. These were Teena (Zn in Queensland) andWeisswasser (Cu in Poland)
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Conclusions [4/4]
• Discovery methods vary with the commodity type and depth of cover
– In 2010-16 the average depth of cover for new gold and base metal discoverieswas 60 metres. However this was made up of greenfield discoveries (at 18m) andbrownfield discoveries (at 159m)
– Over the last decade 54% of all greenfield discoveries made in the World wereoutcropping, and 96% were less than 100 metres.
– Over period 2000-16, only 12 gold discoveries (out of 570) were >500 metres. Allof these were brownfield targets in mature districts
– For base metals, over the last decade, only 9 (out of 308) were >500 metres. Onlytwo of these were greenfields. These were Teena (Zn in Queensland) andWeisswasser (Cu in Poland). At these very deep levels the main explorationtechnique used is “extrapolation from known mineralisation
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To improve its performance, industry needs to developbetter tools for exploring beyond 200 metres of cover
Contact details
Richard SchoddeManaging DirectorMinEx ConsultingMelbourne, Australia
Email: [email protected]: MinExConsulting.com
Copies of this and other similarpresentations can be downloaded
from my website
Copies of this and other similarpresentations can be downloaded
from my website
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