The purpose of incorporating progressive risk and value analysis into the exploration process is to introduce procedures that will increase its cost effectiveness independent of any gains achieved by improved targeting.

Issues and Challenges

Mineral exploration is a high-risk commercial activity in which, historically, less than one in a thousand prospects achieve economic success. Measures to assess that risk progressively, and weigh it against actual and potential value addition, should be integral to the activity Unfortunately, such measures are not readily available and are infrequently applied.

In recent years there has been a growing acknowledgement that much exploration expenditure has resulted in value destruction. There is now a strong desire to better integrate the business and science of exploration, and give more attention to the assessment of risk and value. To achieve these outcomes, two challenges will be addressed by this research theme:

• developing practical, effective tools for industry that enable progressive assessment of the risk profile and the actual and potential value addition, as an exploration project proceeds, and;
• ensuring that these tools are cast in language that facilitates communication between exploration executives and senior non-technical management This language must enable an improved mutual appreciation of the business and value of exploration.

Outputs, Outcomes and Strategies:

• Practical tools to progressively assess risk and value during exploration, using examples from gold, sulphide nickel and high grade iron ore exploration.
• Additional tools to facilitate communication of risk and value assessments to senior non-technical management.
• Graduates with new skills required by industry.

These outputs will be aimed squarely at industry and over time they can reasonably be expected to lower the risk component of the risk : reward ratio. Their value will be enhanced through integration into all other research themes and the targeting tools they produce.

To achieve these key outputs, the Centre will strengthen its research through collaborative links with other groups working on risk and value analysis (e.g. CSIRO Petroleum and Macquarie University), and encourage and extend such research wherever possible. It will also work closely with industry to access the data bases and case histories that are essential for forward assessment of risk and value.

Effective outputs are expected to have substantial impacts on the understanding of explorers and senior management about the progressive risk profile and value consequences of the exploration process. Such impacts would lead to more considered decisions about project selection, management of projects, and strategic allocation of capital to exploration. A reduction in the risk factor can be expected to follow, together with an increased appreciation of exploration as a business activity.

Actions and Resources

Considerable emphasis will be given to close collaboration with research by Macquarie University in the Yilgarn to maximise outputs. In addition, methods of risk and value analysis used in other high risk commercial activities, such as oil exploration, the pharmaceutical industry and the investment sector will be reviewed for more appropriate methods. The most suitable methods will be thoroughly tested against a range of actual projects before incorporating risk and value analysis into outputs from field-based research themes. Integration with outputs from Brownfields and Greenfields Exploration should result in powerful examples of the approach to build confidence and facilitate the transfer of the technology. Establishing confidence in these methods (both within CET and in industry) will be essential before they are transferred to industry for routine use.

It is anticipated that around 10% of the Centre’s resources will be directed to this theme, for which the pro tem leader will be Associate Professor Pietro Guj.

Possible Projects

• Systematically analyse best practice for risk and uncertainty applications in the petroleum, pharmaceutical and finance industries and identify the most practical and suitable methods for the mineral industry
• Select unbiased and representative models for a particular class of deposits from the Brownfields and Greenfields Exploration themes (e.g. orogenic gold in the Kalgoorlie Terrane), convert their key geological attributes to numerical parameters on the basis of statistics, experience and expertise, and allocate uncertainty estimates to each parameter.
• Assign risk and uncertainty measures to each exploration stage for these representative models in this class of deposits, with emphasis on the drilling stage where risk and reward is highest; determine the range of realistic costs associated with each exploration stage.
• Calculate the range of expected values that exploration would aim to deliver to mining operations for the representative models under conditions of varying cover and depth; allocate these values across the various stages of exploration (assuming progression to the next stage); determine potential reward profiles and values for the risk : reward ratio, and the associated uncertainty, for each stage in the exploration process.
• Incorporate risk, reward, and uncertainty estimates into practical packages for a class of deposits that employ language and terminology of equal utility to explorers and management, and that enable practical assessment of current exploration projects for that deposit type.