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Schodde RC, "Recent trends in Mineral Exploration are we finding enough?", Presentation to the RMG 8th Annual Exploration & Mining Investment Conference, Stockholm, November 2011.


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The presentation talks about trends in expenditures and discoveries in the world since 1950. It attempts to answer the question - is the industry making enough discoveries to meet the future needs for new mines?

Key observations are:

  • Exploration expenditures are cyclical. The Western World industry is currently spending ~$14 billion up from $8b pa over the last decade
  • The current hot spots for exploration success are Latin America, Yukon/Alaska, Northern Ontario, West Africa, East Africa and China
  • Unit Discovery Costs are rising for many commodities. In the case of gold, copper and uranium the projected finding costs (in constant June 2011 US Dollars) for the coming decade are estimated to be around $30/oz Au, 2 c/lb Cu and $4/lb U3O8 respectively
  • At current high levels of exploration spending the industry is expected to find (on average) around 177 Moz pa of gold, 54 Mtpa of copper and 102 ktpa of U3O8 resources. Whiles these rates are higher than current mine production for each of these metals it should be noted that ...
  • Not all discoveries turn into mines. Historically, only 60-70% of all gold discoveries are ultimately developed as mines. For copper, the conversion rate is lower at 50-60%. The likelihood of success depends on the project's size, quality and location
  • Not all of the contained metal is recovered. Mining and processing losses typically run at 5-10%
  • Even if the project is successfully developed as a mine, there is a lag of 10-15 years between discovery and development
  • This last factor means that by the time the discovery is ready to be developed as a mine, total demand will be bigger than today
  • Consequently, to provide an adequate supply of good quality (economic) projects 10-15 years out, the industry needs to be finding 2x as much metal as will be mined at the time. Using the average level of spending in the last decade, the likely discovery/mining ratios for uranium, gold and copper is respectively estimated to be 1.0x, 1.5x and 0.6x. Even if exploration spending remains at the (high) levels achieved in 2010 the discovery/mining ratios increase to only 2.0x, 2.6x and 1.1x. This suggests that uranium and (to a lesser extent) gold explorers are struggling to supply an adequate pipeline of new discoveries. The implications for long term commodity prices are profound.

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