Success Strategies for Mineral Exploration Companies in Australia

-Does a Boot Leather versus High Technology approach matter?

Allan Trench

General Manager Exploration, Gutnick Resources NL1.

Associate Professor, Mineral Economics, Western Australian School of Mines2.

Graduate School of Management, University of Western Australia3

Gary Stockport

Graduate School of Management, University of Western Australia4


A literature review of mineral exploration practice reveals both technical and strategic (organisational) approaches to the management process.

Within the technical management domain, contrasts exist between those companies employing a field-intensive, ‘boot leather’ approach, and competitors adopting an instrument-driven, ‘high technology’ focus. Neither approach is preferable – the choice being driven by the particular strengths of the firm coupled with the ore deposit model.

On the strategic management of mineral exploration, a previously developed model for success proposed by McKinsey & Company is revisited and simplified. A self-test questionnaire to measure a company’s approach in relation to the McKinsey model is presented.


This paper aims to review technical and strategic management practice as applied to mineral exploration in Australia. It seeks to clarify existing literature in the subject area and summarise the findings and approaches of previous workers.

The paper proposes that the technical mineral exploration strategy that will be most successful for an organisation is that which best matches the distinctive capabilities of that organisation and its’ operating environment– There is no single recipe for a ‘high technology’ versus ‘boot leather’ approach. Likewise, there is no single recipe for ‘onshore’ versus ‘overseas’ balance in an exploration project portfolio. Companies adept at ‘high technology’ exploration should, and no doubt will, emphasize that point in their technical approach. Likewise, companies skilled in ‘overseas’ versus ‘onshore’ operation are more likely to bias their exploration efforts towards ‘overseas’ locations.

On the separate question of successful strategic management of mineral exploration – taken here to mean organising for success - there is evidence that a generic solution may indeed exist. In the absence of significant recent advances, the conclusions drawn in a 1975 McKinsey study of Australian exploration practice may provide clues to an optimum management formula (. That is, a management approach encompassing strong board leadership and excellent management style should prevail. Critical appraisal of the McKinsey study reveals that board leadership is defined across four separate attributes and excellent management-style across a further ten.

The contention of this paper is that companies scoring fourteen out of fourteen on the McKinsey scale of attributes should discover more ore deposits than companies rating a lower score. It is unlikely that a company needs to perfectly ‘fit’ the McKinsey attributes (i.e. rate a perfect score of strong performance across all fourteen measures) to achieve exploration success. Nevertheless, a high rating on these measures is likely to provide a leading indicator of future success.

Further work is required to update the McKinsey study and to establish a more thorough understanding of successful management practice in this important field.

Mineral Exploration Management – Digging for Evidence

Recipes for success in mineral exploration are akin to stock market tips – Some may be correct and some may be woefully incorrect. Some may even turn out to be correct but for the wrong reasons! Similarly, just as stock picks may be based upon either fundamental or technical analysis of financial data, the supposed drivers of exploration success differ in principle between authors. For example, the organisers of this symposium point to the contrast in approach between those exploration managers that favour ‘boot leather’, stressing on-the-ground investigation of mineral prospects versus those that we might term ‘high technology’ supporters, placing emphasis upon instrumentation advances and their application.

The premise of this paper is that exploration success can be managed – it is not solely a matter of being at the right place at the right time. With appropriate management, the exploration process can then move forward to face other challenges such as the difficulty of raising equity risk capital and competing with other investment options .

On the matter of boot leather versus high technology, the answer from the management literature is clear – It depends upon the distinctive capability of the organisation concerned rather than upon a specific recipe applicable to particular deposit styles. This is the essence of the resource-based view of the firm e.g , , . That is, companies need to match their own capabilities with the spectrum of elements that underpin technical management of mineral exploration. A summary of these elements forms Figure 1 (modified after ) comprising both temporal/spatial relationships controlling the location of mineral deposits and the physio-chemical tools that are employed to discover them.

On the matter of organising for exploration success however, a previous study by consultants McKinsey & Company (1975) offers hope for a generic solution. The conclusions of this historical study are repeated here – lest they be forgotten. A diagrammatic representation of the elements determined by McKinsey to drive strategic management of mineral exploration forms Figure 2.

McKinsey (1975) highlight four attributes that engender board leadership and a further ten attributes that constitute excellent management style for mineral exploration. The study was based upon analysis of 14 "large" mining companies operating in Australia during the mid-seventies – As a result, the conclusions may require modification to be applicable to smaller corporate entities.

These attributes are recounted below (modified here for brevity). The McKinsey contention is that companies answering yes to these questions will be more successful in exploration than those answering no.

Board Leadership:

  1. Does the board take a significant leadership role in exploration rather than treat it as a ‘down-the-line’ technical function?
  2. Do the board develop and communicate a powerful and believable rationale for exploration?
  3. Do the board evidence strong commitment to exploration through spending patterns and organisational relationships?
  4. Are few, thoughtful, targets set at board level for exploration outcomes?

Excellent’ Management Style:

  1. Does the exploration management team believe that ‘small’ organisational character is essential?
  2. Is the pattern to which your organisation works more important than the specific management structure?
  3. Do exploration managers aid and abet the process of idea generation?
  4. Does the company assimilate new technologies quickly?
  5. Is the operation of the exploration team best described as ‘structured chaos’?
  6. Is technical risk-taking encouraged within a regime of tight scientific discipline?
  7. Does the exploration team abhor administration?
  8. Are projects managed in bite-sized pieces?
  9. Does the company take the view that good explorers are made rather than born?
  10. Is the exploration budget used as a means to create opportunity rather than as a control device?

As stated above, a simplification (perhaps over-simplification on our part) of the McKinsey study is that companies answering yes to the above questions will outperform those answering no. How did your company do?

Note that McKinsey offer no formal definitions of terms such as the ‘pattern’ of an organisation (#6) or of the exact meaning of ‘structured chaos’ (#9). Whilst explorers within companies generally relate closely to these terms, a more definitive understanding is required before the study can be substantively advanced.

Delving deeper into the McKinsey work, their study also revealed several other parameters that characterise successful explorers. Firstly, those companies that spend a greater proportion of their budget upon drilling achieve greater exploration success. This is the origin of the often quoted 40/20 rule in exploration. That is, forty per cent of an exploration budget spent upon drilling finds ore bodies, merely twenty per cent spent upon drilling does not! Secondly, those companies with fewer active exploration projects outperform those firms with a myriad of active projects. Finally, peer companies regarded those companies with access to inhouse exploration specialists (geophysicists and geochemists) as successful explorers.


Mineral Exploration Management – Other Evidence

In analysing the exploration management literature, methodologies of assessment are numerous. Whilst some authors recommend and document a case history approach (e.g. , ,, ,, ), other authors point specifically to the value in teamwork e.g. , , ). That is not to say that the first group of authors did not acknowledge teamwork, merely that the focus of attention lies in the case history rather than the team dynamic.

Still others highlight the application and importance of specific technologies e.g. , , , , , , . A separate approach is to analyse the return upon investment achieved by mineral exploration for different deposit styles e.g. . This latter method fails to look ‘inside’ exploration programs however and thus is not intended to reveal attributes of success versus failure. What is clear from these collective works is that a theory of successful mineral exploration in Australia, or elsewhere, lies some way off.

Mineral Exploration Management – Pulling together Threads

Few authors, it seems, have focused upon the organisational issues that drive exploration – that is the setting of exploration within the corporate hierarchy and its internal jurisdiction. Exceptions are the work of McKinsey (1975) and elements within , and ). White (1997) highlights the importance of mindset, management systems, experience, communication and training in organising for successful exploration. Woodall (1984, 1993) stresses the dual factors of persistence and confidence – akin to aspects of the first three of McKinsey’s board leadership attributes (questions #1 - #3 above).

Taking a holistic view, exploration is analogous to the management of research and development (, of innovation (, and of technology development (e.g. . There may be a great deal that we can learn, as explorationists, from the management of these other disciplines. Perhaps Gary Hamel’s drive towards a theory of innovation management may provide a platform for a similar understanding of exploration management.

A Working Management Tool?

In application, it is noteworthy that mineral exploration success at Gutnick Resources in Western Australia appears to have been aided by an adoption of the McKinsey model in recent years. Gutnick Resources doesn’t score perfect marks as yet (fourteen out of fourteen), but hopefully has hit a double figure rating. From historical gold discovery costs worse than the industry average, the last two years has seen a significant improvement in discovery costs per resource ounce, in particular with the discovery of the Saxon Extended gold resource . For the last two years at least, Gutnick Resources lays claim to be ahead of industry averages. But as with all such observations, one case study does not a theory make.

A final word is that one can never of course fully rule out the role of luck in mineral exploration - simply that one should never rely upon it! Even in Michael Porter’s classic work upon the competitive advantage of nations , luck still rates a mention as a driving force. So it is too with mineral exploration – but the premise of this paper is that appropriate management of the exploration process increases the probability of success. A bit like playing lotto when you already know some of the numbers, not just a case of buying more lotto tickets!

Concluding Remarks:

We hope that this paper assists in the debate convened for the Sydney Mineral Exploration Discussion Group (SMEDG) conference on the role of the ‘boot leather’ exploration strategy versus the ‘high technology’ approach. The subject area is indeed one of extreme importance to the future economic development of Australia. Much work remains to be done to test hypotheses that have been uncovered in earlier studies – particularly that of McKinsey & Company (1975). As a means to commence such work, a questionnaire forms Appendix 1 that seeks to further investigate hypotheses of successful exploration management. Please complete the questions if you have an interest in this topic and kindly return it to the authors.

We have refrained from comment here on the other burning issue set for discussion – the relative merits of exploration versus acquisition as a preferred growth engine. The astute reader would probably guess our response to that question – That those companies adept at exploration should focus there whilst those companies with a distinctive capability in acquisition should "stick to their knitting" also.

A word of caution for the "acquisitionists" – you need to beat the market efficiency equation (the rule of zero Net Present Value) to grow the true profitability of the firm. That is not to say the target deposit or company has a zero Net Present Value (NPV) – merely that the expected price will be the NPV with no additional benefit to the acquirer. A few other thoughts on this theme are contained in a short monograph entitled "The Business of Mining – Beating The Commodity Trap" from which SMEDG conference chairman Steve Collins drew the following quote:

".... the idea has prevailed that a couple of business analysts and a spreadsheet can acquire deposits more cheaply than discovering them. This is correct of course, providing that no other mining company has a copy of Excel and a couple of people that know how to use it."

On this contentious note, perhaps we should end.


Mr Joseph Gutnick. All the geoscientists, staff and contractors of Gutnick Resources. Professor Philip Maxwell.




FIGURE 1: Aspects of the Technical Management of Mineral Exploration.

FIGURE 2: Aspects of the Strategic Management of Mineral Exploration




Successful Management of Mineral Exploration Survey : 2001



Thank you for taking time to fill out this questionnaire about the management of mineral exploration by Australian Companies. We hope that you will take this opportunity to communicate your views in this important area.

Information requested in this questionnaire is intended to help understand then improve the future exploration success of Australian companies.

Any information given will of course be treated in the strictest confidence.

Questions in the survey are based upon factors identified as pertinent to exploration management in a historical survey of Australian Explorers by McKinsey & Company Inc. (1975).


The Questions enclosed are presented in a simple "Tick box" format.



Strongly Agree




Strongly Disagree

  1. A high degree of meaningful top management involvement in exploration is critical to success…………………….

For each question simply tick the one box which is most appropriate.


We would like to thank you for your time and effort in completing this questionnaire. When you have completed the questionnaire simply return it to us in the enclosed pre-paid envelope.


Should you have any questions related to this survey, please do not hesitate to call :

Dr Allan Trench Ph: 041 963 9633.











Managing for Mineral Exploration Success


Please consider the role of luck in mineral exploration and indicate your opinion on the following statement:



Strongly Agree




Strongly Disagree

Mineral exploration is all about luck – Having exploration management strategies does not alter the likelihood of success……




Top Management (Board) Involvement in Mineral Exploration Success

Please consider those attributes of top management behaviour that, in your experience and opinion, have contributed to mineral exploration success.


Please indicate the importance of each of the following characteristics. (Please tick one box)


The board of our company seek…..

Strongly Agree







Strongly Disagree


A high degree of meaningful involvement in the exploration activity.………………….


A style of management within the exploration group that encourages good science in a risk-tolerant, bureaucracy-free environment.………




Please indicate how strongly you agree or disagree with the following statements as they describe your board’s management of exploration

Strongly Agree







Strongly Disagree

  1. The board take a significant leadership role in exploration, rather than treat it as a "down-the-line technical function"……….
  • The board develop and communicate to the exploration group a powerful and believable rationale for exploration………………………………...
  • The board do not evidence strong commitment to exploration through spending patterns and organisational relationships………………
  • The board set a few, but thoughtful, targets for exploration……………………………



    Exploration Management Style

    Please consider the style of exploration management within your organisation.

    Please indicate to what extent you agree with the following statements. (Please tick one box only)



    Strongly Agree




    Strongly Disagree

    1. Small organisation character is essential…achieving it is difficult but not impossible within exploration teams of large companies.
  • The pattern to which the organisation works is more important than a specific organisation structure…………...…….
  • Good ideas just happen - management cannot aid and abet the process………
  • The ability to assimilate new technology quickly looks as if it will become increasingly important….…
  • Structured chaos is a useful pattern……………………
  • Scientific discipline should be tight but risk-taking tolerated or encouraged..….
  • Administration in exploration is to be abhorred……………………………….
  • Projects are best managed if broken into bite-size pieces………………..….
  • Good explorers cannot be made – they are born…………………...….………
  • The budget should be an opportunity creator, not mainly a control device. Drilling is a prime case in point.


















    In order to provide you with the best possible feedback we would be grateful if you could tell us about yourself. If there is any information that you would rather not provide, simply leave those questions blank.

    1. Years of Experience: Please tick the length (in years) of your mining industry experience (tick one):















    > 36

    1. Occupational Status: Please indicate your current occupation (tick one):
    2. Executive Director


      Non-Executive Director


      Exploration Manager



    3. Team Size: Please indicate with a tick the number of people in your exploration team













    4. Employment: Are you currently (tick one):



    Permanent Employee


    Self Employed


    Contract Employee






    : How long have you worked with this company (tick one):

    2 Years or less


    3-5 Years


    6 Years or more

    1. Project Management : Please indicate how many active exploration projects your company presently manages (tick one):

    2 or less










    15 or greater








    Please indicate the expenditure importance of the following cost centres. (Please tick one box)




    0 – 20%







    > 80%


    The following proportion of the total exploration budget is presently spent upon drilling.…………………………………...




    The following proportion of the total exploration budget is presently spent upon salaries and fixed costs…………..






    Please take this opportunity to tell us of any comments that you would like to make in regard to the successful management of mineral exploration in Australia. If you so choose, we may consider quoting your comments within the research report synthesis.




    Tick one as appropriate

    You have my permission to quote my closing comments (Name) _____________

    You have my permission to quote these comments as from an anonymous source

    Please do not include the above comments in the final research report