What’s the future for Mineral Exploration in Australia?minexconsulting.com/wp-content/uploads/2019/04/GSAV... · 2019-04-26 · MinEx Consulting Strategic advice on mineral economics

MinEx Consulting Strategic advice on mineral economics & exploration

What’s the future for MineralExploration in Australia?

…. and why we need smart geoscientists now !

Richard SchoddeManaging Director, MinEx Consulting

Adjunct Professor, University of Western Australia

The Geological Society of Australia – Victoria Division25th October , Clayton


Overview• Trends in Exploration Expenditures

- Changes in expenditures by commodity

- What drives exploration spend?

• Trends in Discovery

- Number, size, type, location and quality of deposits discovered

- What type of companies are making the discoveries?

• Current “Hot Spots” for Exploration

- Where are the big discoveries being made?

• Trends in Discovery rates versus Mining rates

- Is industry finding enough metal to replace what it mines?

• Special Challenges facing Australia

- What can we do about it?- Why we need new geoscientists with fresh ideas

• Conclusions

2


TRENDS IN EXPLORATIONEXPENDITURES

Spending on mineral exploration in the World and Australia

3


World exploration expendituresExploration expenditures by Region: 1996-2011

$0

$5,000

$10,000

$15,000

$20,000

1996 1998 2000 2002 2004 2006 2008 2010

Rest of World

Africa

Pacific/SE Asia

Latin America

USA

Canada

Australia

4

Total Expenditures (2012 US$m)

Note: Excludes exploration on Bulk Minerals (such as coal, iron ore and bauxite) and Uranium Source: © Metals Economics Group,Corporate Exploration Strategies 2011

MinExestimatesfor 1996


World exploration expendituresExploration expenditures by Region: 1996-2011

0%

20%

40%

60%

80%

100%

1996 1998 2000 2002 2004 2006 2008 2010

12%

14%

21%

18%

5

Australia

Canada

USA

Latin America

Pac/ SE Asia

AfricaRest of the World

Percentage of Total Spend

Note: Excludes exploration on Bulk Minerals (such as coal, iron ore and bauxite) and Uranium Source: © Metals Economics Group,Corporate Exploration Strategies 2011

Between 1996-2011Australia’s share

dropped from 21% to12%, and Canada’s

rose from 14% to 18%

Between 1996-2011Australia’s share

dropped from 21% to12%, and Canada’s

rose from 14% to 18%

MinExestimatesfor 1996


Exploration expenditures in Australia: 1990-2012

$0

$1,000

$2,000

$3,000

$4,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Other - Bulk

Iron Ore

Coal

Uranium

Other - Non Bulk

Diamonds

Gold

Base Metals

6

June 2012 A$M

Source: ABS Cat No. 8412.0

MinExestimates

A$3860m

Major shift to Bulksin recent years


A$2850m

Year-ending December

Expenditureson non-bulks

have plateaued

Expenditureson non-bulks

have plateaued

Note: Includes exploration on Bulk Minerals (and Uranium


0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Other - Bulk

Iron Ore

Coal

Uranium

Other - Non Bulk

Diamonds

Gold

Base Metals

52%Bulks

48%Non Bulks

Increased focus on exploring for bulk mineralsExploration expenditures by commodity type in Australia

7

Source: ABS Cat No. 8412.0

MinExestimates


9% Bulks

91%Non Bulks


Base Metals

Uranium

Gold

Other

Iron OreDiamonds

Coal

Most of theexpenditureswere in Bulks

Most of theexpenditureswere in Bulks


Exploration Expenditures: Western World

0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Bulks

Uranium

Other - Non Bulk

Diamonds

Gold

Base Metals

8

Sources: MinEx Consulting estimates, based on data fromABS, NRCan, Tilton (1988), Wallace (1992,93),OECD and Metal Economics Group © 2011

Percentage of the total

Base Metals

Uranium

Gold

Other

Bulks

Diamonds

Most of theexpenditures

continue to beon Gold

Most of theexpenditures

continue to beon Gold


FACTORS DRIVING THE LEVEL OFEXPLORATION SPEND

Main driver is commodity prices

9


Key Drivers for exploration

10

• The main driver is the commodity price

• Secondary drivers include :– New discoveries … such as Voisey Bay and Ekati, and failures like Bre-X

– New geological concepts and search techniques… such as the copper porphyry model, airborne GeoPx systems

– New processing technologies, which make lower grade ore bodieseconomic … such as Au CIP in 1970s, Cu SXEW in the 1980s, PAL NiLat

in the 1990s and Sulphide Biox Heap Leaching in 2010s ?

– Government Policies … such as flow-through tax credits in Canada.Conversely the introduction of new Royalties or Carbon Taxes may makesome mines uneconomic

– Changes in business risk … such as the opening up / closing down ofthe Developing World

– Competing use of funds … Shares in gold companies have done poorlysince the introduction of Gold-based Exchange Traded Funds (ETF’s)


Key drivers for Exploration: Case Study on GoldGold price versus exploration expenditures in Australia: 1970-2012

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

$0

$200

$400

$600

$800

$1,000

$1,200

1970 1980 1990 2000 2010

11

Exploration Expenditures(June 2012 A$m)

Gold Price(June 2012 A$/oz)

Sources: ABS and LME

Step changein the gold

price

Step changein the gold

price

Development ofCIP/CIL processing

technology

Development ofCIP/CIL processing

technology

New geochem toolsand low costanalyticals

New geochem toolsand low costanalyticals

Gold Price(RHS>) Explorn Sepnd

(<LHS)

Staking rush aroundold gold camps

Staking rush aroundold gold camps

String of Majordiscoveries

String of Majordiscoveries


The Key Driver is the Commodity PriceGold exploration expenditures in Australia versus gold price

2000-2012 with one year lag for spend

y = 0.29x + 284.21R² = 0.80

$400

$500

$600

$700

$800

$900

$1,000

$400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

12

Exploration Expenditures in following year(June 2012 A$m)

Gold Price (June 2012 A$/oz)

2012

Sources: ABS and LME

2000

2008

Note: “2012” refers to expenditures in 2012 based on the gold price in 2011


Iron Ore exploration expenditures versus iron ore priceAustralia: 2000-2012 with one year lag for spend

y = 8.84x - 197.59R² = 0.86

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$0 $50 $100 $150 $200

13

Exploration Expenditures in following year(June 2012 A$m)

Iron Ore Price – High Grade Fines (June 2012 A$/t FOB Port Hedland )

2012

Sources: ABS and BREE

2000

2008

Note: “2012” refers to expenditures in 2012 based on the iron ore price in 2011

CAUTION: “What goesup must come down !”CAUTION: “What goesup must come down !”

MinEx Consulting Strategic advice on mineral economics & exploration14

Exploration spend is also driven by discoveryNiS discoveries and exploration expenditures in the Yilgarn: 1960-2004

Source: Hronsky & Schodde, 2006Economic Geology, Special Publication 13

ExplorationExpenditures

Discoveries

Western Australia’s“Nickel Boom” ran

from 1966-71

Western Australia’s“Nickel Boom” ran

from 1966-71

In Jan 1966 WMCdiscovered the Lunnon

Shoot at Kambalda

In Jan 1966 WMCdiscovered the Lunnon

Shoot at Kambalda

$0

$50

$100

$150

$200

$250

$300

0

1

2

3

4

5

6

1960 1970 1980 1990 2000 2010

Discovery Year

Expenditures(June 2012 A$ Million)Ni Discovered (Mt)


CAUTION !!

15

Success should be measured in terms of outputs (ie number of economicdiscoveries) rather than inputs (such as expenditures).

Useful key performance indicators (KPI) for exploration include:

• Drilling activity (metres drilled)• $ spent per discovery• cents/lb of metal found

• $ spent per Tier 1 & 2 Discovery

Measure ofEfficiencyMeasure ofEfficiency

Measure ofEffectiveness

Measure ofEffectiveness

Industry commentatorstend to focus on this

Industry commentatorstend to focus on this


RECENT DISCOVERIES IN AUSTRALIA- SIZE

Number of Major and Giant discoveries 1975-2011

16


Discoveries & Expenditures : Australia

$0

$1,000

$2,000

$3,000

0

10

20

30

1975 1980 1985 1990 1995 2000 2005 2010

Moderate

Major

Giant

Exploration $

17

Sources: ABS and MinEx Consulting © August 2012

Number ofDiscoveries

Caution:Incompletedata

“Moderate” >100Koz Au, >10Kt Ni, >100Kt Cu equiv, >5 kt U3O8

“Major” >1moz Au, >100Kt Ni, >1mt Cu equiv, >25 kt U3O8

“Giant” >6moz Au, >1 mt Ni, >5mt Cu equiv, >125 kt U3O8


Discoveries and expenditures exclude Bulk Minerals (such as coal, iron ore and bauxite)

In spite of higher expenditures,Australia’s discovery rate has

declined in recent years,especially for larger deposits




RECENT DISCOVERIES IN AUSTRALIA- QUALITY

Number of Tier 1, 2 and 3 discoveries 1975-2011

18



$0

$1,000

$2,000

$3,000

0

10

20

30

1975 1980 1985 1990 1995 2000 2005 2010

Tier 3

Tier 2

Tier 1

Exploration $

19







declined in recent years,especially for Tier 1 deposits


declined in recent years,especially for Tier 1 deposits

Olympic DamSt Ives

Argyle

Boddington Granny SmithCannington

CadiaCallie Eucla


DISCOVERY PERFORMANCE OF AUSTRALIAVERSUS THE REST OF THE WORLD

Number of Major discoveries 1975-2011

20


Discoveries: Australia versus the World

0

20

40

60

80

1975 1980 1985 1990 1995 2000 2005 2010

21

Source: MinEx Consulting © May 2012


Caution:Incomplete

data

Based on discoveries “Moderate” in size or larger,ie >100 koz Au, >10 kt Ni, >100 kt Cu equiv, >5 kt U3O8

Australia

FSU + E Europe +China

Western World (excluding Australia)

Excludes Bulk Mineral discoveries

On average, 40-60 discoveries aremade each year in the world, of which

5-10 are in Australia

On average, 40-60 discoveries aremade each year in the world, of which

5-10 are in Australia

N = 1968


Discoveries: Australia versus the World

0%

20%

40%

60%

80%

100%

1975 1980 1985 1990 1995 2000 2005 2010

22

Based on discoveries “Moderate” in size or larger,ie >100 koz Au, >10 kt Ni, >100 kt Cu equiv, >5 kt U3O8

Australia

FSU + E Europe +China

Excludes Bulk Mineral discoveries

Over the period 1975-2010 Australia’s share ofthe Western World’s discoveries averaged 20%. Over

same period its share of total spend was 16%

Over the period 1975-2010 Australia’s share ofthe Western World’s discoveries averaged 20%. Over

same period its share of total spend was 16%

Western World (excluding Australia)

Percentage of Total Discoveries

Source: MinEx Consulting © May 2012


Discovery Rates and Costs by SizeAustralia versus the Rest of the Western World

Period No ofDiscoveries

in Aust / WW

Australia’sshare of

Discoveries

Australia’sshare of WWExplorationExpenditure

Cost per Discovery(US$2011m)

Australia Rest of WW

Moderate Discoveries #

1980-89 125 / 520 24% 17% $55m $85m

1990-99 116 / 559 21% 19% $70m $79m

2000-10 73 / 412 18% 13% $126m $189m

Major Discoveries #

1980-89 65 / 260 25% 17% $106m $171m

1990-99 49 / 313 16% 19% $165m $133m

2000-10 25 / 220 11% 13% $367m $329m

Giant Discoveries

1980-89 10 / 55 18% 17% $688m $742m

1990-99 13 / 87 15% 19% $622m $475m

2000-10 3 / 44 7% 13% $3056m $1564m

23

# Note: Includes discoveries from the larger size range.Excludes Bulk Mineral exploration and discoveries


WHAT TYPES OF COMPANIES AREEXPLORING IN AUSTRALIA ?

Major versus Junior Companies 1996-2012

24


Most exploration is now done by Junior CompaniesBase metal + gold + diamond exploration expenditures by All Companies in Australia

0%

20%

40%

60%

80%

100%

1996 1998 2000 2002 2004 2006 2008 2010 2012

25


Note: Excludes exploration on Bulk Minerals and UraniumDetailed breakdown for 1996 & 2012 are MinEx estimates

Majors

Juniors

Intermediates

36%

MinExestimates

Over last decade the Juniorsshare of spend has risen from

36% to 53%

Over last decade the Juniorsshare of spend has risen from

36% to 53%

53%

22%

42%

15%

30%

Sources: ABS and © Metals Economics Group,

Corporate Exploration Strategies 2011


RECENT DISCOVERIES AROUND THE WORLD

Global view of the exploration & mining industry

26


Significant mineral discoveries: All Years

27

Note: Excludes Bulk Mineral discoveries

Note: Supergiant >60 Moz Au, >125 kt U3O8, >10 Mt Ni, >25 Mt Cu equivGiant >6 Moz Au, >25 kt U3O8 , >1 Mt Ni, >5 Mt Cu equivMajor >1 Moz Au, 25 kt U3O8 , > 100 kt Ni, >1 Mt Cu equivModerate >0.1 Moz Au, 5 kt U3O8 , > 10 kt Ni, >0.1 Mt Cu equiv

Major discoveriesmade on all continents

Major discoveriesmade on all continents

BaseGold Metal U3O8 Other

Major

GiantSupergiant

Moderate

Source: MinEx Consulting © September 2012


Significant mineral discoveries: 2000-12

28


Major

GiantSupergiant

Moderate

Source: MinEx Consulting © September 2012Note: Excludes Bulk Mineral discoveries



Significant mineral discoveries: 2000-12

29


Major

GiantSupergiant

Moderate

Source: MinEx Consulting © September 2012Note: Excludes Bulk Mineral discoveries


Alaska/Yukon NorthernOntario

Latin America

7 Current “Hot Spots”7 Current “Hot Spots”

West AfricaCentral Africa

China

West Australia


Gold discoveries since 2000

30

Source: MinEx Consulting © September 2012

10 Moz

5 Moz1 Moz

0.1 Moz

PrimaryGold

By-ProductGold


TREND IN DISCOVERY COSTS

Costs are rising

31


2.5 c/lb

Discovery costs in the Western World - Copper

32

Note: The reported costs include credits for by-product metal

US Cents per lb Cu-eq in 2011$

3 Year rolling average

Estimates

Discovery costs spikedduring a down-turn in

industry activity

Discovery costs spikedduring a down-turn in

industry activity

Source: MinEx Consulting © August 2012

Copper discoverycosts have doubled

in recent years

Copper discoverycosts have doubled

in recent years

A similar trend occursfor other metals


ARE WE FINDING ENOUGH METAL ?

Trends in the finding and mining rates for copper

33


Amount of nickel metal found and mined in the WorldPrimary Nickel deposits >10 kt found : 1950-2011

34

0

5

10

15

20

25

1950 1960 1970 1980 1990 2000 2010

Ni Laterite discoveries

Ni Sulphide discoveries

Mine Production

Note: Chart includes an adjustment for deposits with unknown discovery date,and deposits not captured in the database

Mt Ni 24.8mt

Sources: MinEx Consulting March 2012Production data from USGS


Mining & Discovery rates for UraniumAmount of Primary U3O8 found and mined in the World: 1950-2010

0

200

400

600

1950 1960 1970 1980 1990 2000 2010

Discoveries

World Production

Note: Chart excludes Olympic Dam (Cu-U-Au deposit) found in 1975 – contains 2545 kt U3O8

kt U3O8

Estimate

Note: Chart include minor adjustment for deposits missing from the databaseIs based on discoveries > 0.5 kt U3O8

Sources: MinEx Consulting © July 2012Production data from USGS


Amount of copper found and mined in the WorldPrimary copper deposits >0.1 Mt Cu found : 1950-2011

36

0

20

40

60

80

100

120

140

160

1950 1960 1970 1980 1990 2000 2010

Discoveries - Estimated

Discoveries - By-Product

Discoveries - Primary

Mine Production

Mt Cu

Source: MinEx Consulting March 2012

Estimated

The copper industry finds more thanit mines … but only the high-quality

projects will go into production

The copper industry finds more thanit mines … but only the high-quality

projects will go into production



Are we finding enough metal ?

• Key drivers– Current discovery rates

– Importance of By-Product credits

– Conversion rate for Resources > Reserves

– Conversion rates (from discovery to operating mine)

– Lag between discovery and development

– Losses on mining

– Current and (more importantly) future demand for metal

37

Given the long delays to convert adiscovery into a mine, need toconsider size of market at that time

Given the long delays to convert adiscovery into a mine, need toconsider size of market at that time


Not all copper projects get developed as mines

0%

20%

40%

60%

80%

100%1

950

-54

195

5-5

9

196

0-6

4

196

5-6

9

197

0-7

4

197

5-7

9

198

0-8

4

198

5-8

9

199

0-9

4

199

5-9

9

200

0-0

4

200

5-0

9

201

0+

Stalled

Advanced Exploration

Feasibility - New Project

Development Construction

Operating Mine

Care & Maintenance

Closed Mine

Analysis based on 384 copper deposits >0.5 Mt Cu found in the World 1950-2011

Discovery Year

Current Project Status


Eventually ~60% of copperdiscoveries get developed.Caution: Rate varies withsize, grade and location

Eventually ~60% of copperdiscoveries get developed.Caution: Rate varies withsize, grade and location


For those deposits that are developed into mines, ittakes on average 16 years from discovery to production

1950

1960

1970

1980

1990

2000

2010

1950 1960 1970 1980 1990 2000 2010

Greenfield

Brownfield

39

Discovery Year

Mine start-up Year 0 Years delay10 Years20 Years

18 Years

12 Years

Brownfield projects tend tobe quicker to develop


WORLD : Cu only


For those deposits that are developed into mines, ittakes on average 7 years from discovery to production

1950

1960

1970

1980

1990

2000

2010

1950 1960 1970 1980 1990 2000 2010

Greenfield

Brownfield

40

Discovery Year

Mine start-up Year 0 Years delay10 Years20 Years

8 Years

6 Years



AUSTRALIAall commodities


Are we finding enough metal ?

• Key drivers– Current discovery rates ... is slowing down

– Importance of By-Product credits ... only a minor effect

– Conversion rate for Resources > Reserves ... Not all gets converted

– Conversion rates (from discovery to operating mine) ... only 60-80%

– Lag between discovery and development ... typically 12-18 years

– Losses on mining ... typically 10-15%

– Current and future demand for metal ... Demand doubling every 25 years

• Modifying factors– Current inventory of undeveloped projects (and their quality)

– Ability to increase resources through lowering the cut-off grade

– Long term costs

– Impact of environmental and social factors)

– Long term prices

41

Given the feedback loops, is this an input or an output ??Given the feedback loops, is this an input or an output ??


How much metal do we need to find ?

42

To ensure no supply interruptions in the longer term the industryneeds to be finding 2-3x as much metal as it currently mines

To ensure no supply interruptions in the longer term the industryneeds to be finding 2-3x as much metal as it currently mines


Estimated Discovery/Production ratios

Gold Copper Uranium

Unit discovery costs ~$30/oz ~3 c/lb ~$2.50/lb

World exploration spend rate(2011 US$m pa)

[A] = $3700m[P] = $8500m

[A] = $1670m[P] = $4000m

[A] = $650m[P] = $1190m

Expected amount of metal tobe found

[A] = 123 Moz[P] = 283 Moz

[A] = 27 Mt[P] = 65 Mt

[A] = 118 kt[P] = 215 kt

Mine Production(in 15 years time)

2011 = 84 Moz2026 = 95 Moz

2011 = 16 Mt2026 = 25 Mt

2011 = 64 kt2026 = 133 kt

Discovery/Production Ratios [A] [P] [A] [P] [A] [P]

At 2011 Production Rate 1.5x 3.4x 1.7x 4.0x 1.8x 3.4x

At 2026 Production Rate 1.3x 3.0x 1.1x 2.6x 0.9x 1.6x

43

[A] = Average exploration spending rate over last decade (2002-11)[P] = Peak exploration spending rate (in 2011)

Target is >2xTarget is >2x

Source: MinEx Consulting © Sept 2012


SPECIAL CHALLENGES FACING AUSTRALIA

Brown field exploration, targets under deeper cover

44


Special challenges facing Australia

• Discovery rates have stagnated

• Unit discovery costs are rising

• Our existing mines are maturing – and we need to replace them

• Drilling rates haven’t increased – if you don’t drill you won’t discover!

• Undue emphasis on brownfield exploration – biggest discoveries tendto be greenfield

• Discoveries are being made under progressively deeper cover

45



$0

$1,000

$2,000

$3,000

0

10

20

30

1975 1980 1985 1990 1995 2000 2005 2010

Moderate

Major

Giant

Exploration $

46




“Moderate” >100Koz Au, >10Kt Ni, >100Kt Cu equiv, >5 kt U3O8

“Major” >1moz Au, >100Kt Ni, >1mt Cu equiv, >25 kt U3O8

“Giant” >6moz Au, >1 mt Ni, >5mt Cu equiv, >125 kt U3O8








Gold discovery costsAustralia versus Western World: 1975-2011

$0

$20

$40

$60

$80

$100

1975 1980 1985 1990 1995 2000 2005 2010

Australia

Western World

3 Year rolling average

47

2012 US$/oz


Discovery costsare rising

Discovery costsare rising


AUSTRALIA’SPERCIEVED BUSINESS RISK

What do exploration companies think of Australia’s policies forsupporting the mining industry ?

48


0

20

40

60

80

100

Hon

dura

s

Gua

tem

ala

Bol

ivia

Ven

ezue

la

Indi

a

Phi

lippi

nes

Kyr

gyzs

tan

Ecu

ador

Indo

nesi

a

Vie

tnam

Gui

nea

Pan

ama

Kaz

akhs

tan

Rom

ania

Laos

Mon

golia

Egy

pt

DR

CC

ongo

Juju

y

Zim

babw

e

Men

doza

Sur

inam

e

Rus

sia

Chu

but

Rio

Neg

ro

Nig

er

Dom

inic

anR

ep

PN

G

San

taC

ruz

Col

ombi

a

Tan

zani

a

San

Juan

Cat

amar

ca

Tur

key

Mad

agas

car

Chi

na

Bra

zil

Per

u

Sal

ta

Sou

thA

frica

Guy

ana

Mau

ritan

ia

Cal

iforn

ia

Zam

bia

Mis

sour

i

NW

Ter

ritor

ies

Bul

garia

Pol

and

Nam

ibia

Vic

toria

Mal

i

Gha

na

New

Mex

ico

Mon

tana

Was

hing

ton

Bur

kina

Fas

o

Spa

in

Nun

avut

Mex

ico

Mor

occo

Col

orad

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New

Sou

thW

ales

Brit

ish

Col

umbi

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Tas

man

ia

Que

ensl

and

Ariz

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New

Zea

land

Idah

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Ala

ska

Nor

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Mic

higa

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Min

neso

ta

Uta

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Man

itoba

Sou

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ustr

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Chi

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Bot

swan

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Labr

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Nov

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Gre

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Ont

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Wes

tern

Aus

tralia

Nor

ther

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errit

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Yuk

on

Irel

and

Nev

ada

Sw

eden

Sas

katc

hew

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Que

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Wyo

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Alb

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Fin

land

New

Bru

nsw

ick

Australia is no longer viewed as a desirable mining jurisdictionPolicy Potential Index (Measures the “ability to do business” there)

49

Source: Fraser Institute March 2012

PPI Score Note: Higher the Score, the better

RANKINGS (out of 93)Northern Territory 11Western Australia 12South Australia 19Queensland 29Tasmania 30New South Wales 32Victoria 44

2012 Fraser Institute Survey

None of the Australian Statesmade it into the “Top 10” mining

jurisdictions in the World

None of the Australian Statesmade it into the “Top 10” mining

jurisdictions in the World

SA

WA

NSW

NT

TAS

VIC

QLD


… and our relative ranking has slowly deteriorated over time

0

20

40

60

80

100

2000 2002 2004 2006 2008 2010 2012

50

Victoria

Source: MinEx Consulting analysis of Fraser Institute annual surveys

South Australia

Queensland

Northern Territory

NSW

Western Australia

Tasmania

PPI Score ( ie “ability to do business” there)

4th Quartile

3rd Quartile

2nd Quartile

1st Quartile


Percentage of exploration budgets allocated to domesticexploration by location of corporate headquarters: 1996-2011

0%

20%

40%

60%

80%

100%

1996 1998 2000 2002 2004 2006 2008 2010 2012

Australia

Canada

51%

62%

36%

51

Percent of Total Available Funds

Note: Analysis excludes Bulk MineralsSource: © Metals Economics Group,

Corporate Exploration Strategies 2011

23%


FORECAST EXPLORATIONEXPENDITURES FOR AUSTRALIA

The Boom is over (for bulk commodities)

52


Forecast exploration expenditures for AustraliaExploration expenditures by commodity type in Australia

$0

$1,000

$2,000

$3,000

$4,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Other - Bulk

Iron Ore

Coal

Uranium

Other - Non Bulk

Diamonds

Gold

Base Metals

53

June 2012 A$M

Sources: 1990-2011 data from ABS Cat No. 8412.02012-2014 forecast by MinEx Consulting © Oct 2012

forecast

A$3860m



A$2850m


Expenditureshave peakedExpenditureshave peaked

A$2520m


INDUSTRY SUSTAINABILITYExploration is needed to replace the mines that close-down

54


Estimated Remaining life for Major Australian Mines(based on all operations mining >1 Mt ore in 2010. Excludes Bulk Minerals)

55

2011 2015 2020 2025 2030 2035 2040

Closure Datebased on current

Reserves

Estimated Mine Lives are approximate only and are based on dividing the currentP&P Reserves and MI&I Resources by the production rate reported for 2011

Half of Australia’s existingmines could close down

within 7 to 18 years

Half of Australia’s existingmines could close down

within 7 to 18 years

Closure Date based oncurrent Resources



Drilling has not kept up with expendituresLevel of exploration in Australia: March 1990 - June 2012

0

5

10

15

20

25

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Mar-90 Mar-95 Mar-00 Mar-05 Mar-10

Exploration Expenditures

Metres Drilled

56

Total Expenditures (2012 A$M) Total metres drilled (Million)

Source: ABS Cat No. 8412.0Note: Includes drilling and exploration expenditures on Bulk Minerals and UraniumData reported on an annualised basis

Over the last decade, expenditures(in real terms) have increased 4-fold,

but drilling has only doubled

Over the last decade, expenditures(in real terms) have increased 4-fold,

but drilling has only doubled


The amount of drilling on new deposits hasflat-lined in recent years

Level of exploration drilling in Australia: Sept 2003 - June 2012

0

2

4

6

8

10

Mar-03 Mar-05 Mar-07 Mar-09 Mar-11

57

Total metres drilled (Million)

Source: ABS Cat No. 8412.0Note: Includes exploration expenditures on Bulk Minerals and UraniumABS only started the data series in September 2003Data reported on an annualised basis.

New Deposits

Existing Deposits

Increased emphasis onBrownfield ExplorationIncreased emphasis onBrownfield Exploration


Existing Camps & Deposits do mature over timeCumulative production and remaining Resource at the Kambalda Nickel Camp: 1966-2011

0

500

1000

1500

2000

1960 1970 1980 1990 2000 2010

Remaining Resource

Cumulative Mill Losses

Cumulative Production

58

kt Ni

Source: MinEx Consulting © August 2012,based on Various Company Reports

Most of the pay-off from Brownfield Explorationoccurs in the first decade after mine start-up

Most of the pay-off from Brownfield Explorationoccurs in the first decade after mine start-up


DEPTH OF COVERNew discoveries are progressively being made under deeper cover

59


Depth of cover on discoveriesMineral discoveries in Australia : 1950-2012

60

Source: MinEx Consulting © August 2012Note: Analysis excludes Bulk minerals, and is limited to Moderate, Major and Giant deposits onlySatellite deposits supply ore to a central mill within an existing mining camp


Note: Major defined as >1 moz Au, >1mt Cu, > 100kt Ni or equivalentExcludes Bulk Minerals such as Coal, Bauxite and Iron Ore

Major mineral deposits in AustraliaDepth of cover

61

Outcrop & Shallow Basement

Basement depth <500m

Basement depth 500 to 1000m

Basement depth >1000m

Sources: MinEx Consulting August 2010Geoscience Australia


Outcropping

1-50 m

51-200 m

>200 m

Note: Major defined as >1 moz Au, >1mt Cu, > 100kt Ni or equivalentExcludes Bulk Minerals such as Coal, Bauxite and Iron Ore

Major mineral deposits in AustraliaDepth of cover

62

Outcrop & Shallow Basement

Basement depth <500m

Basement depth 500 to 1000m

Basement depth >1000m

Sources: MinEx Consulting August 2010Geoscience Australia


Industry is progressively moving to deeper discoveriesAverage depth of cover for Greenfield and Brownfield Discoveries (in metres) in Australia: 1950-2012

1950-59 1960-69 1970-79 1980-89 1990-99 2000-12

Greenfield 5 35 45 52 27 64

Brownfield(including satellite deposits)

46 86 66 77 114 185

63

Note: Analysis is based on a sample of 587 mineral discoveries made in Australia between 1950-2012.Excludes Bulk Minerals, and is limited to Moderate, Major and Giant deposits onlySatellite deposits supply ore to a central mill within an existing mining camp



Even though giant gold deposits do exist at depth, to datemost exploration has been limited to <25 metres of cover

Primary gold discoveries (>0.1 Moz) found in the Western World: 1950-2009

Number Total Ounces (Moz)

64

Average Size (Moz)

De

pth

of

Co

ver

(Met

res)

Moz Moz

Most gold discoveries(by number & Ounces)

are under less than25 metres of cover

On average, the biggestdeposits were found

below 50 metres … Butthe industry doesn’t havegood tools to find them

N = 333

Source: MinEx Consulting © Jan 2010


SUMMARY/CONCLUSIONSThe future for mineral exploration in Australia

65


Summary / Conclusions

• Trends in Exploration Expenditures

- Exploration is a cyclical business. Spending is currently at an all-time high,driven by high commodity prices

• Trends in Discovery- In terms of expenditure and number of discoveries, gold continues to be the main

commodity of interest

• Current “Hot Spots” for Exploration- There are seven areas of current interest around the World.

• Trend in Discovery Costs

- Costs have doubled in the last decade

• Sustainability issues- Industry is struggling to replace the metal it mines

66


Summary / Conclusions

• Challenges facing Australia- Looks like the exploration boom has peaked (at A$3.9 Billion)

- Business Risks are rising

- Discovery rates have stagnated, and costs are up

- Need to find new camps to replace the existing mines – half of which could closedown in the next 7-18 years

- It takes on average 7 years to convert a discovery into a mine

- Next generation of major discoveries will be under deeper cover in new districts

- Need to do more drilling and more greenfields exploration

- It can be achieved, but spending need to continue at current (high) rates. Industryneed to be more efficient and effective at how and where it explores

67

… to do this requires energetic and smart new geoscientists !!

MinEx Consulting Strategic advice on mineral economics & exploration 68

Contact details

Richard SchoddeManaging DirectorMinEx ConsultingMelbourne, Australia

Email: [email protected]: MinExConsulting.com

Copies of similar presentations canbe downloaded from my website

Copies of similar presentations canbe downloaded from my website

What’s the future for Mineral Exploration in Australia?minexconsulting.com/wp-content/uploads/2019/04/GSAV... · 2019-04-26 · MinEx Consulting Strategic advice on mineral economics

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