Mineral exploration is in crisis. Despite a tenfold increase in spending from 2002 through 2012, the number of discoveries has remained flat. The low-hanging fruit is gone. Today’s explorers must dig deeper—literally and figuratively.
Despite huge advances in exploration technology, productivity is waning. Why is the industry still falling behind in exploration performance? Are matters of leadership, management approach, talent management, or even culture causing the exploration drought? What should explorers do about this now that budgets have been halved over the past two years?
To better understand the forces underlying the crisis, The Boston Consulting Group began by interviewing six of the world’s best-known explorationists. We asked them: What do they consider the secrets to their success? And what do they perceive as the impediments, at the company and industry levels, to exploration performance today?
Collectively, these exploration legends identified eight recommendations that should be part of any exploration strategy.
Forgo frontier areas that have no definite sign of mineralization. Although greenfield exploration is synonymous with new frontiers, it does not mean searching in areas that demonstrate no clear signs of mineralization. The best chances for discovery exist in mineral districts or in the geological trend of districts. Furthermore, a mineralizing event in favorable geology generally creates more than one ore body.
To boost the odds of success, exploration strategy should recognize the importance of working with—and not against—nature. For example, large ore bodies (such as porphyry copper) or tabular deposits (such as sediment-hosted base metals or uranium) are much easier targets than nickel shoots or gold veins. Successful exploration leaders allow pragmatism to govern their exploration strategy rather than succumb to the temptation to pursue complex or exotic deposit styles.
The odds of discovery are low to begin with, but companies don’t boost them when they minimize their drilling activity to save money. Successful explorers are those who drill the most holes. Several legends concur: Failure is a certainty most of the time, but it takes only one victory to compensate for many unsuccessful attempts.
In today’s risk-averse equity market, companies frequently forgo greenfield exploration, or projects into uncharted areas, in favor of near-mine, or brownfield, exploration. However, the notion that greenfield exploration is more risky than advanced projects in near-mine locations relies on faulty logic. Many companies confuse certainty (that is, how much we know about a resource) with risk (that is, the likelihood of a positive return from the investment). As projects near depletion, they, in fact, become riskier than greenfields.
Striking the right balance of greenfield and brownfield exploration projects is more than just a matter of hedging risk. Both types of exploration are essential for long-term exploration success. A mix of the two creates a diversified project portfolio with different development timelines, as well as different levels of maturity and risk.
Good explorationists think strategically about every drill hole and find ways to stretch the return from every dollar invested in drilling. Drilling strategy can be as simple as using inclined holes to penetrate targets that are directly beneath difficult surface terrain. Or it might be strongly influenced by the size and depth of a targeted ore body.
Many mining legends lament the current dependence on computers and modeling—an overreliance that they contend comes at the expense of field observation. Today’s explorationists, according to Douglas Kirwin, who has 45 years of international exploration experience, rely too little on “boots and hammer.” This trend has been a big factor in reducing the experience and skills of geologists in the field. The experts also believe that the fly-in, fly-out way of working has hurt exploration in particular.
Joint ventures have fallen out of favor at some large companies, and that has hurt exploration. Joint ventures provide valuable new ideas and represent the fastest entrée into countries where an explorationist or a company has no prior experience. A company that has an existing foothold knows the scene and the politics.
In exploration, persistence is a virtue. At a minimum, companies should allow three years for testing a greenfield terrain with confirmed mineralization. Yet, persistence should not trump pragmatism. Sig Muessig, who has spent more than 50 years in global exploration, mining, and mining management, puts it this way: