Managing Director, MinEx...

Where, what, when and who?

Highlighting key global exploration opportunities, trends anda perspective on the cycle of mineral exploration

Richard SchoddeManaging Director, MinEx Consulting

International Mining and Resource Conference (IMARC)31st October 2018, Melbourne

Overview

1. Location of recent discoveries

2. Trends in the number, size and quality of discoveries

3. Who made the discoveries ?

4. Trends in the discovery methods used

5. How much is being spent on exploration, and what’s the likelyoutlook ?

6. What’s happening in the Junior Sector?

7. When is the best time in the business cycle to be an explorer?

8. Summary / Conclusions

2

1. LOCATION OF RECENTDISCOVERIES

Over the last decade more than 1100 significant discoveries weremade in the World

3

Significant discoveries in the world by Size: 2008-2017

Source: MinEx Consulting © October 2018

Note: Bubble Size refers to Moderate / Major / Giant deposits

N = 882

GOLD

PRECIOUS (PGE+Ag+Diamonds)

BASE METAL (Cu+Ni+Zn+Pb)

URANIUM

MINERAL SANDS

BULK (Bauxite+Coal+Iron Ore+P2O5+K2O)

OTHER

Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8, >20 Mt Fe, >20 Mt Thermal Coal“Major” >1Moz Au, >100kt Ni, >1Mt Cu, 2.5Mt Zn+Pb, >25kt U3O8 , >200 Mt Fe, >200 Mt Thermal Coal“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu, 12Mt Zn+Pb, >125kt U3O8 , >1000 Mt Fe, >1000 Mt Thermal Coal

882 known deposits, plus ~240(as yet) unreported discoveries882 known deposits, plus ~240(as yet) unreported discoveries

Significant discoveries in the World by Quality: 2008-2017


Note: Bubble Size refers to Tier 1 / Tier 2 / Tier 3

N Tier1 = 15N Tier2 = 69N Tier3 = 314

398 Tier-1, -2 and -3deposits found in the

last decade

398 Tier-1, -2 and -3deposits found in the

last decade

GOLD



URANIUM

MINERAL SANDS


OTHER

“Tier 1” deposits are company-making mines and are large, long life and low cost with NPVat the Decision-to-Build stage of >$1000m (in 2013 US Dollars)

“Tier 2” deposits are “significant” and have some of the elements of a Tier 1 but have an NPV of $200 to $1000m“Tier 3” deposits are modest or marginal deposits, with an NPV of $0 to $200m

Tier 1 discoveries in the World : 2008-2017


No Tier-1 discoveriesin Latin America

or Australia

No Tier-1 discoveriesin Latin America

or Australia

GOLD



URANIUM

MINERAL SANDS


OTHER

Golpu[2009: Copper]

Kamoa[2008: Copper]

Kakula[2014: Copper]

Luaxe[2013: Diamonds]

Red Hill/ Goldrush[2008: Gold]

Cote[2010: Gold]

Brucejack[2008: Gold]

Xiling[2016: Gold]

Haiyu[2011: Gold]

Balama[2011: Graphite]

KP405[2013: Potash]

Zhuxi[2013:Tungsten]

Arrow[2014: Uranium]

Huoshaoyun[2012: Zinc]

Taylor[2012: Zinc]

15 of these are Tier-115 of these are Tier-1

4 in China, 4 in Canada,2 in USA and 2 in DRC

4 in China, 4 in Canada,2 in USA and 2 in DRC This could change .. There are a number

of potential T1 projects in both places

2. LONG TERM TRENDS IN THE NUMBER,SIZE & QUALITY OF DISCOVERIES

The number of discoveries made has steadily risen over time

7

Number of discoveriesSignificant mineral discoveries in the World: 1900-2017

0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Total

Number

7345

7108

237

Note: Based on deposits >=“Moderate” in-size. i.e. >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8

>5 Mt Heavy Minerals, >20 Mt Fe, >20 Mt Thermal Coal >10 Mt Met Coal, >3 Mt P2O5 and >3 Mt K2O

8


The number of discoveriesmade each year has been

slowly rising over time

The number of discoveriesmade each year has been

slowly rising over time

Includes anadjustment for

unreporteddiscoveries

Includes anadjustment for

unreporteddiscoveries

Its too early to tell whether the recent dropin the discovery rate is “real” or “apparent”

Number of discoveries by commodity typeSignificant mineral discoveries in the World: 1900-2017

0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Other

Coal

Iron Ore

Uranium

Base Metal

Gold

Number

368

7345

601

1244

237

1951

2628

316



9


Number of discoveries by commodity typeSignificant mineral discoveries in the World: 1900-2017

0%

20%

40%

60%

80%

100%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Other

Coal

Iron Ore

Uranium

Base Metal

Gold



10


Percentage of Total

Gold remains themain target of

interest

Gold remains themain target of

interest

Number of discoveries by regionSignificant mineral discoveries in the World: 1900-2017

0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Rest of World

China

FSU + E Europe

Western Europe

Africa

Pac / SE Asia

Latin America

United States

Canada

Australia

686

7345

254

237

266

1114

717

1060

641

870

396

1104

11


>5 Mt Heavy Minerals, >20 Mt Fe, >20 Mt Thermal Coal >10 Mt Met Coal, >3 Mt P2O5 and >3 Mt K2OSource: MinEx Consulting © October 2018

Number

Number of discoveries by regionSignificant mineral discoveries in the World: 1900-2017

0%

20%

40%

60%

80%

100%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

Rest of World

China

FSU + E Europe

Western Europe

Africa

Pac / SE Asia

Latin America

United States

Canada

Australia

Percentage of TotalRise of China and

the return of AfricaRise of China and

the return of Africa

Australia has grown … but many ofthese discoveries are small in sizeAustralia has grown … but many ofthese discoveries are small in size

The relative importance ofeach Region changes over time

The relative importance ofeach Region changes over time

In the early 1900’s USAwas dominant …

In the early 1900’s USAwas dominant …

… followedby Canada… followedby Canada

Russia dropped out following thecollapse of the Soviet Union in 1991

Russia dropped out following thecollapse of the Soviet Union in 1991

… is driven by geological maturity, technology,infrastructure and Country Risk

12


Number of discoveries by sizeSignificant mineral discoveries in the World: 1900-2017

0%

25%

50%

75%

100%

0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Moderate

Major

Giant

% Moderate

Number

7345

1064

3649

237

2395

13


Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8, >20 Mt Fe, >20 Mt Thermal Coal“Major” >1Moz Au, >100kt Ni, >1Mt Cu, 2.5Mt Zn+Pb, >25kt U3O8 , >200 Mt Fe, >200 Mt Thermal Coal“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu, 12Mt Zn+Pb, >125kt U3O8 , >1000 Mt Fe, >1000 Mt Thermal Coal

58%

In recent years, an increasingproportion of discoveries are

“Moderate” in size

In recent years, an increasingproportion of discoveries are

“Moderate” in size

% Moderate-size[5-year rolling average]

45%

… though this may simply be anartefact of the time required toproperly drill-out a discovery

Number of discoveries by qualityTier 1, 2 & 3 mineral discoveries in the World: 1900-2017

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est UnreportedUnclassifiedTier 3Tier 2Tier 1% Tier 1

Number

7345

676

262

237

2564

14


Note: “Tier 1” deposits are company-making mines and are large, long life and low cost with NPV at Decision-to-Build of >$1000m (in 2013 US Dollars)“Tier 2” deposits are “significant” and have some of the elements of a Tier 1 but have an NPV of $200 to $1000m“Tier 3” deposits are modest or marginal deposits, with an NPV of $0 to $200m“Unclassified” deposits are small deposits with an Expected Value of ~$10m

2%

Over time, Tier 1 discoverieshave become less frequent

Over time, Tier 1 discoverieshave become less frequent

% Tier-1[5-year rolling average]

3606

4%

8%

12%

3. LONG TERM TRENDS IN WHOMADE THE DISCOVERIES

15

Junior explorers are now finding most of the deposits

Number of discoveries by company typeSignificant mineral discoveries in the Western World: 1900-2017

0%

20%

40%

60%

80%

100%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Other

Government

Prospector

Junior Explorer

Small Producer

Moderate Producer

Major Producer

16


Percentage of Total

Between 1950-2000 MajorProducers accounted for

32% of all discoveries made

Between 1950-2000 MajorProducers accounted for

32% of all discoveries made

In the last decade 65% of alldiscoveries in the WW weremade by Junior Explorers

In the last decade 65% of alldiscoveries in the WW weremade by Junior Explorers

Prior to 1930Prospectors

accounted for 69% ofall discoveries made

Prior to 1930Prospectors

accounted for 69% ofall discoveries made

Note: “Junior Explorer” has no income“Small Producer” has a single small mine and <$50m pa sales revenue (in 2013 US Dollars)“Moderate Producer” has 1-3 mines and $50-500m pa sales revenue“Major Producer” has several large mines and >$500m pa revenue“Other” includes industrial companies, major oil companies and private/unlisted companies

4. LONG TERM TRENDS INEXPLORATION METHODS

17

There have been several innovations in the exploration tools usedto make discoveries

Trends in exploration methods

Continental-Scale

Province-Scale

District-Scale

Project-Scale

Prospect-ScaleMinEx has carried out a detailedanalysis of the discovery history of3799 deposits at these two scales

MinEx has carried out a detailedanalysis of the discovery history of3799 deposits at these two scales

The preferred search method used varies by commodity type,

depth of cover and “scale”

Primary search method used at the project-scaleALL discoveries in the World: 1900-2017

0%

20%

40%

60%

80%

100%

Serendipity

Other

Prospector

Visual

Conceptual/Geological

Geological Mapping

Extrapolated fromKnown MineralisationGeochem

Geophysics + Geochem

Geophysics

Percentage of total discoveries

ie What method wasused to decide where

to peg the leases

ie What method wasused to decide where

to peg the leases

Note: Analysis based on detailed analysis of 3799 projects (out of 7108 known discoveries) Source: MinEx Consulting © October 2018

The most popular area selection method is towork in areas of known mineralisation

The most popular area selection method is towork in areas of known mineralisation

0%

20%

40%

60%

80%

100%

Serendipity

Prospector

Other

Drilling (Sole Method)

Visual

Conceptual/Geological

Geological Mapping

Extrapolated from KnownMineralisationGeochem

Geophysics + Geochem

Geophysics

Primary search method used at the prospect-scaleALL discoveries in the World: 1900-2017

ie What method wasused to decide whereto drill the first hole

ie What method wasused to decide whereto drill the first hole

Note: Analysis based on detailed analysis of 3799 projects (out of 7108 known discoveries) Source: MinEx Consulting © October 2018

(Depending on the commodity & location) Geophysics andGeochemistry are the two main techniques used to site the drill rig

(Depending on the commodity & location) Geophysics andGeochemistry are the two main techniques used to site the drill rig

5. HOW MUCH IS SPENT ON EXPLORATION,AND WHAT’S THE OUTLOOK?

MinEx forecasts a sustained recovery in explorationover the next decade

21

A Multi-Factor modelwas built to predict thelikely exploration spend

A Multi-Factor modelwas built to predict thelikely exploration spend

R2 = 0.91

Exploration spend varies with the commodity price : GoldGold price and exploration expenditures - World : 1975-2017

$0

$2

$4

$6

$8

$10

$12

$14

$0

$500

$1,000

$1,500

$2,000

1975 1985 1995 2005 2015

2018 US$/oz 2018 US$ Billion

$0

$2

$4

$6

$8

$10

$12

$14

$0 $500 $1,000 $1,500 $2,000

2017 US$ Billion

2017 US$/oz AuYear

2017

Gold Price

ExplorationSpend

1985-2016


See similarcorrelations for

other commodities

See similarcorrelations for

other commodities

1985

TrendlineR2 = 0.81

22

Historical and forecast exploration expenditures by CommodityMineral exploration – World : 1975-2025

$0

$5

$10

$15

$20

$25

$30

$35

1975 1985 1995 2005 2015 2025

Other

Coal

Iron Ore

Uranium

Base Metals

Gold

2018 US$ Billion

Forecast ->>

$15.6 bin 2025

$10.5 bin 2016

$31.0 bin 2012

Between 2018 and2025 expenditures

are set to rise by 32%


are set to rise by 32%

$11.8 bin 2018

$3.1 bin 2002

Note: Includes expenditures on non-bulk and bulk mineral (i.e. bauxite, coal, and iron ore) exploration

Forecast is based on a long-run price (in constant 2018 US Dollars) of $1200/oz Au, $3.00/lb Cu,$7.50/lb Ni, $1.00/lb Zn, $0.80/lb Pb, $50/lb U3O8 $60/t iron ore fines and $75 & $150/t for thermal & met coal

23


$22.5 bin 2008


fell by 70%


fell by 70%

Strongest growth willbe in base metals and“Other”

Exploration is very mucha “boom-or-bust”

business


business

Historical and forecast exploration expenditures by RegionMineral exploration – World : 1975-2025

$0

$5

$10

$15

$20

$25

$30

$35

1975 1985 1995 2005 2015 2025

Rest of World

FSU + E Europe

China

Western Europe

Africa

Pacific / SE Asia

Latin America

USA

Canada

Australia

2018 US$ Billion

Forecast ->>


24

$15.6 bin 2025

$10.5 bin 2016

$31.0 bin 2012

$3.1 bin 2002

$22.5 bin 2008

The strongest growingregions will be LatinAmerica and Africa

The strongest growingregions will be LatinAmerica and Africa

Note: Includes expenditures on non-bulk and bulk mineral (i.e. bauxite, coal, and iron ore) exploration

Forecast is based on a long-run price (in constant 2018 US Dollars) of $1200/oz Au, $3.00/lb Cu,$7.50/lb Ni, $1.00/lb Zn, $0.80/lb Pb, $50/lb U3O8 $60/t iron ore fines and $75 & $150/t for thermal & met coal


business


business

6. WHAT’S HAPPENING IN THEJUNIOR SECTOR ?

The junior sector has gone through some tough times – and is nowon way back up

25

Cash Reserves and Expenditures for the MEDIANAustralian Junior Exploration Company : 1998-March 2017

-$1

$0

$1

$2

$3

$4

$5

Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16

2016 A$ Million pa

Note: Survey based on a sample of 320 junior exploration companies listed on the ASX between 1998-2017“Net Other” includes production and other costs less interest income, mine revenue,Government Assistance and R&D tax credits

Quarterly spend data has been multiplied by 4x to produce an annualised spend rate

Cash Reserves

Exploration& Development

Administration

Net Other

Source: MinEx Consulting © June 2017based on Quarterly Reports to the ASX

During a downturn,“in-field” exploration &

development expendituresare cut the most

During a downturn,“in-field” exploration &

development expendituresare cut the most

Admincosts tend

to be“fixed”

Admincosts tend

to be“fixed”

CashReserves

are buildingoff an all-time low

CashReserves

are buildingoff an all-time low

26

Huge impact onservice providers

7. WHEN IS THE BEST TIME IN THEBUSINESS CYCLE TO BE AN EXPLORER ?

Discovery performance varies greatly over time

27

Exploration Expenditures and amount of Primary Metal discoveredPrimary Gold World: 1975-2016

$0

$2

$4

$6

$8

$10

$12

$14

0

50

100

150

200

250

1975 1985 1995 2005 2015 2025

Moz Au 2017 US$b

28


ExpendituresDiscoveries

Est unreporteddiscoveries

Exploration Expenditures and amount of Primary Metal discoveredPrimary Gold World: 1975-2016

$0

$2

$4

$6

$8

$10

$12

$14

0

50

100

150

200

250

1975 1985 1995 2005 2015 2025

Moz Au 2017 US$b

29


ExpendituresDiscoveries

Est unreporteddiscoveries

D

DD

$ $

$

D??

The peaks indiscoveries precedesthe peaks in spend !

The peaks indiscoveries precedesthe peaks in spend !

The best time to get in, is when explorationspend bottoms out and starts rising …

30

…. which is NOW !

8. SUMMARY / CONCLUSIONS

31

Summary / Conclusions [1/2]

1. Location of recent discoveries – over 1100 discoveries have been made inthe last decade … but only 15 of these were Tier 1 (or World Class). 4 each werefound in Canada and China, 2 each in USA and DRC and zero in Australia.

2. Trends in the number, size and quality of discoveries – Gold stillremains the main focus. Appears to be a drop in the size and quality of recentdiscoveries. Its getting harder to find a Tier 1 deposit. The number of discoveriesmade each year has been slowly rising over time.

3. Who made the discoveries ? – Used to be driven by the Majors. Juniorexplorers now account for 65% of all discoveries (by number). Chinese SOE’s areimportant within China.

4. Trends in the discovery methods used – Area selection is mainlydriven by presence of known mineralisation. Geophysics andGeochemistry are the two main techniques used to site the drill rig

32

Summary / Conclusions [2/2]5. How much is being spent on exploration, and what’s the likely

outlook ? – Exploration is very much a “boom-or-bust” business. The 2 key drivers are

commodity prices and market sentiment (which affects Junior Company’s ability to raisecapital). Exploration expenditures are set to rise by 32% over the next 7 years. Strongestgrowth will be in base metals and “Other”. Strongest regions will be Latin America andAfrica.

6. What’s happening in the Junior Sector? – Junior companies are now raising

cash – and are coming out of hibernation / more active in the field.

7. When is the best time in the business cycle to be an explorer?– Peak performance precedes peak spending ! Based on the last 3 business cycles,

exploration performance is maximised in the first couple years after coming out of thebottom of the business cycle

33

… That time is now ! !

My call is that the industry will deliver a number ofgame-changing discoveries over the next 2 years

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

SPARE SLIDES

X. BUSINESS CASE FOR EXPLORATION

Its simple – for the industry to be sustainable it need to find (good)new deposits to replace what it mines.

36

World’s demand for metals doubles every 20-30 yearsPrimary copper production for World: 1900-2050

0

5

10

15

20

25

30

35

40

45

1900 1920 1940 1960 1980 2000 2020 2040

Cumulative copperproduction for all history

(1000 BC to 2018 AD)= 730 Mt Cu

Cumulative copperproduction for all history

(1000 BC to 2018 AD)= 730 Mt Cu

Forecast cumulativedemand over next 26 years

(2019-2044)= 746 Mt Cu

Forecast cumulativedemand over next 26 years

(2019-2044)= 746 Mt Cu

Forecast DemandBased on 1.8% pagrowth

Historic DemandAverage growth rate of3.3% pa over last 25 years

Sources: Historical data from USGS andOffice of the Chief Economist Sept 2018

Mt pa Cu

21.2 Mt pain 2018

35.6 Mt pain 2044

9.5 Mt pain 1993

5.0 Mt pain 1968

2.6 Mt pain 19430.5 Mt pa

in 1900

Over the next 26 years the world is going to minemore copper than what has been mined in all history

Over the next 26 years the world is going to minemore copper than what has been mined in all history

37

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