I have worked in two different company environments that chose to explore from different perspectives.

CSR Limited (1973-1988) had ‘an explorer’s explorer’ perspective. Exploration strategies were primarily focussed on grassroots mineral exploration. That strategy was successful, finding Cattlegrid Copper Mine, Yandicoogina iron ore deposit, Granny Smith and Lerokis gold deposits and expanding the Banka alluvial tin mine. It is my perception that CSR Limited made more from selling its discoveries than from putting them into production. Not being able to make the transition from explorer to mineral producer, ultimately led CSR to withdraw from mineral exploration in 1988. Being retrenched in 1988, one year after discovering Granny Smith gold deposit, was my first experience of the price explorers pay for not adding to shareholder value.

Placer Dome Inc (1988-present) has a ‘mid-stage project’ (MSP) perspective. Exploration strategies are primarily focussed on recognising (as early as possible) large mineral systems, which were discovered by others and farming-in. Another perspective is mine exploration (MINEX) that focuses on finding resources within the economic trucking distance of existing mines. Placer Dome typically commences production on 60% of the resources that are ultimately mined.

The first learning is

Whichever path you chose, stick to it and be urgent in realising shareholder value.

EXPLORATION DESTROYS MORE VALUE THAN IT CREATES.

At the initiation of an exploration program, a future discovery has an optimal value, i.e. the value that would be realised by an efficient exploration process. Actual exploration is less than optimal, i.e. does not follow a critical path. These time delays destroy more value than is ultimately realised by the actual discovery. In mathematical terms, if the maximum net present value (NPV) of a discovery is $X, i.e. the value created by an optimal (minimum time, minimum cost) exploration program, then exploration usually yields a project whose actual NPV is <50% of $X.

The main learning can be described as

The principal reason for value destruction is the loss of value created by sub-optimal time delays between project acquisition and the drilling of the discovery drill hole (i.e. the first hole to show economic mineralisation across a mineable width). A delay of greater than one year is considered sub-optimal in this environment.

Analyses of the actual exploration histories of the main discoveries (Granny Smith, Keringal and Wallaby) identify a means to increase exploration effectiveness.

1. CONFIDENCE, instill confidence in the exploration team.
2. LEARNING ORGANISATION, learn from your mistakes as well as your successes.
3. TEAMWORK, encourage real communication and effective teamwork.

Lord, D., Etheridge, M., Willson, M., Hall, G., and Uttley,P. 2001. Measuring Exploration Success: An alternate to the Discovery Cost-Per-Ounce method of quantifying exploration effectiveness. SEG Newsletter, No 45, April 2001 (In Press).