Role of Technology and Innovation for Identifying and Growing

Economic Resources

Richard SchoddeManaging Director, MinEx ConsultingAdjunct Professor, Centre of Exploration Targeting, University of Western Australia

AMIRA International’s 12th Biennial Exploration Managers Conference26th – 29th March 2019, Hunter Valley Australia

Overview

1. Long term trends in the number of discoveries

2. Location of recent discoveries… and where are the “hot spots” ?

3. Long term trends in discovery methods… and the difficulties in encouraging adoption

4. Declining discovery performance

5. Other factors driving resource growth… impact of engineering and process technology

6. Conclusions

2

1. LONG TERM TREND IN THE NUMBER OF DISCOVERIES

Over the last century more than 7000 significant mineral deposits have been found in the World.

3

Number of discoveries by regionSignificant mineral discoveries in the World: 1900-2018

0

50

100

150

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Est Unreported

Rest of World

China

FSU + E Europe

Western Europe

Africa

Pac / SE Asia

Latin America

United States

Canada

Australia

689

7418

255

2382

267

1119

719

1062

641

877

396

1111

4

Note: Based on deposits >=“Moderate” in-size. i.e. >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8

>5 Mt Heavy Minerals, >20 Mt Fe, >20 Mt Thermal Coal >10 Mt Met Coal, >3 Mt P2O5 and >3 Mt K2OSource: MinEx Consulting © March 2019

NumberThe rate of discovery reached

an all-time high in 2010The rate of discovery reached

an all-time high in 2010 184

Number of discoveries by regionSignificant mineral discoveries in the World: 1900-2017

0%

20%

40%

60%

80%

100%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

Rest of World

China

FSU + E Europe

Western Europe

Africa

Pac / SE Asia

Latin America

United States

Canada

Australia

Percentage of Total

The relative importance of each Region changes over time

The relative importance of each Region changes over time

… is driven by geological maturity, technology,infrastructure and Country Risk

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Source: MinEx Consulting © March 2019

There has been a general movement to new regions & frontiers (Australia is the exception !)

There has been a general movement to new regions & frontiers (Australia is the exception !)

2. LOCATION OF RECENT DISCOVERIES

Over the last decade more than 1000 significant discoveries were made in the World

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Significant discoveries in the world by Size: 2009-2018

Source: MinEx Consulting © March 2019

Note: Bubble Size refers to Moderate / Major / Giant deposits

N = 728

GOLD

PRECIOUS (PGE+Ag+Diamonds)

BASE METAL (Cu+Ni+Zn+Pb)

URANIUM

MINERAL SANDS

BULK (Bauxite+Coal+Iron Ore+P2O5+K2O)

OTHER

Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8, >20 Mt Fe, >20 Mt Thermal Coal“Major” >1Moz Au, >100kt Ni, >1Mt Cu, 2.5Mt Zn+Pb, >25kt U3O8 , >200 Mt Fe, >200 Mt Thermal Coal“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu, 12Mt Zn+Pb, >125kt U3O8 , >1000 Mt Fe, >1000 Mt Thermal Coal

738 known deposits, plus ~270 (as yet) unreported discoveries738 known deposits, plus ~270 (as yet) unreported discoveries

7

Significant discoveries in the World by Quality: 2009-2018

Source: MinEx Consulting © March 2019

Note: Bubble Size refers to Tier 1 / Tier 2 / Tier 3

N Tier1 = 15N Tier2 = 50N Tier3 = 263

328 Tier-1, -2 and -3 deposits found in the

last decade

328 Tier-1, -2 and -3 deposits found in the

last decade

GOLD

PRECIOUS (PGE+Ag+Diamonds)

BASE METAL (Cu+Ni+Zn+Pb)

URANIUM

MINERAL SANDS

BULK (Bauxite+Coal+Iron Ore+P2O5+K2O)

OTHER

“Tier 1” deposits are company-making mines and are large, long life and low cost with NPV at the Decision-to-Build stage of >$1000m (in 2013 US Dollars)

“Tier 2” deposits are “significant” and have some of the elements of a Tier 1 but have an NPV of $200 to $1000m “Tier 3” deposits are modest or marginal deposits, with an NPV of $0 to $200m

8

Tier-1 discoveries in the World: 2009-2018

Source: MinEx Consulting © March 2019

N Tier1 = 15 15 Tier-1 deposits found in the last decade

15 Tier-1 deposits found in the last decade

GOLD

PRECIOUS

BASE METAL

URANIUM

MINERAL SANDS

BULK

OTHER

Note: “Tier 1” deposits are company-making mines and are large, long life and low cost with NPV at the Decision-to-Build stage of >$1000m (in 2013 US Dollars)

GOLD

PRECIOUS

BASE

URANIUM

MINERAL SANDS

BULK

OTHER

Golpu[2009: Copper]

Kakula[2014: Copper]

Luaxe[2013: Diamonds]

Red Hill/ Goldrush [2011: Gold]

Cote [2010: Gold]

Xiling[2016: Gold]

Haiyu[2011: Gold]

Balama[2011: Graphite]

KP405 [2013: Potash]

Zhuxi[2013: Tungsten]

Huoshaoyun[2012: Zinc]

Taylor [2012: Zinc]

Arrow [2014: Uranium]

Cascabel [2013: Copper]

Swan[2016: Gold]

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Current “Hot Spots” for exploration

Source: MinEx Consulting © March 2019

Note: Bubble Size refers to Tier 1 / Tier 2 / Tier 3

GOLD

PRECIOUS

BASE METAL

URANIUM

MINERAL SANDS

BULK

OTHER

Central Africa[Cu,Co]

China[Au, Mo, W]

Pilbara[Cu,Au,Li]

Saskatchewan [U]

Ecuador & Columbia[Cu, Au]

East Africa[Graphite]

Nubian Shield[Au]

Brazil[Cu]

Andes[Lithium]

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Central Europe[Base Metals]

3. LONG TERM TRENDS IN DISCOVERY METHODS

11

There have been several innovations in the exploration tools used to make discoveries

Trends in exploration methods

Continental-Scale

Province-Scale

District-Scale

Project-Scale

Prospect-ScaleMinEx has carried out a detailed analysis of the discovery history of 3799 deposits at these two scales

MinEx has carried out a detailed analysis of the discovery history of 3799 deposits at these two scales

The preferred search method used varies by commodity type,

depth of cover and “scale”

12

Primary search method used at the project-scaleALL discoveries in the World: 1900-2017

0%

20%

40%

60%

80%

100%

Serendipity

Other

Prospector

Visual

Conceptual/Geological

Geological Mapping

Extrapolated fromKnown MineralisationGeochem

Geophysics + Geochem

Geophysics

Percentage of total discoveries

ie What method was used to decide where

to peg the leases

ie What method was used to decide where

to peg the leases

Note: Analysis based on detailed analysis of 3799 projects (out of 7108 known discoveries) Source: MinEx Consulting © October 2018

The most popular area selection method is to work in areas of known mineralisation

The most popular area selection method is to work in areas of known mineralisation

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0%

20%

40%

60%

80%

100%

Serendipity

Prospector

Other

Drilling (Sole Method)

Visual

Conceptual/Geological

Geological Mapping

Extrapolated from KnownMineralisationGeochem

Geophysics + Geochem

Geophysics

Primary search method used at the prospect-scaleALL discoveries in the World: 1900-2017

ie What method was used to decide where to drill the first hole

ie What method was used to decide where to drill the first hole

Note: Analysis based on detailed analysis of 3799 projects (out of 7108 known discoveries) Source: MinEx Consulting © October 2018

(Depending on the commodity & location) Geophysics and Geochemistry are the two main techniques used to site the drill rig

(Depending on the commodity & location) Geophysics and Geochemistry are the two main techniques used to site the drill rig

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Geologists have a wide range of tools to use …

15

1940 1950 1960 1970 1980 1990 2000 2010 2020

Stereonets

1915 …Stereo aerial photographs

1912 … Radiometric Dating

Downhole survey camera

1940’s … Hydraulic Rigs

Wireline Core

Downhole RC Hammer

Mobile RAB Drilling

Image processing

Impregnated Drill bits

Directional drilling

Mobile PC’s

Face sample RC hammer

Rod Handlers

GPS

Mineral systems

Commercial Internet

Air Core drilling

3D Software

Low cost Mobile PC’s

V Wall core rods

SQUID EM

Downhole Gravity

Micro XRF

Laser Ablation ICPMS

UAV’s

Time line of 72 key innovations developed for mineral exploration

Note: The length of the box represents when the given technology was first introduced, and when it became mature.

Source: Robbie Rowe (NextGen Geological), November 2018

GIS

Sonic Drilling

Ore deposit models

1870 …Diamond Drilling

Mobile XRF

Analytics software

HeliTEM

Mobile spectroscopy

Pre-1950

Hylogger

ASTER

3D Inversion

Airborne Gravity gradiometer

Radar Satellites

Mineral spectroscopy

Bio & Hydro geochem

BLEG

ICP MS

3D seismic

Downhole EM

Passive seismic tomography

ICP OES

Regolith geochemistry

Electro Graviometer

SHRIMP

Kimberlite Indicator Minerals

Fluid Inclusion

Landsat

XRF spectroscopy

Fission track dating

SQUID Magnetometer

Plate Tectonics

Time Domain EM

U Pb Th dating

Atomic Absorption spectrophotoscopy

Frequency Domain EM

Stream Sed sampling

Ground IP

Muon Tomography

Airborne EM

Gravimeter

Magnetotellurics (MT)

1948 … Gamma ray radiometrics

1940s … Aeromagnetics

1928 … Metal detectors

1920s … Seismic

1920s … Ground EM

ENABLING TECHNOLOGIES

DRILLING GEOLOGY GEOPHYSICSGEOCHEMISTRYIt typically takes a decade

(or more) for an innovation to become established

It typically takes a decade (or more) for an innovation

to become established

16

However …

… The industry is relatively slow toadopt new ideas

CASE STUDYAdoption of LandSat imaging

CASE STUDYAdoption of LandSat imaging

17

Impact of Landsat on exploration performance

Source: Ahbishek Nagaraj, “The Private Impact of Public Maps LandSat Satellite Imagery and Gold Exploration”, Masters Thesis, MIT, 2016

However, in the early years many of the LandSat photos

were obscured by clouds

However, in the early years many of the LandSat photos

were obscured by clouds

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However it took a decade to convert the opportunity into success

By careful modelling of the statistical data Nagaraj found that when “cloud-free” images became available, the discovery rate per

block went up by 50% (compared to equivalent other areas)

By careful modelling of the statistical data Nagaraj found that when “cloud-free” images became available, the discovery rate per

block went up by 50% (compared to equivalent other areas)

However, it took several years to capture the benefit.

[Surprisingly] he noted that Junior Explorers were twice as good at using the data than the Majors !

Relative Improvement in Discovery Performance per Landsat Block

Source: Ahbishek Nagaraj, “The Private Impact of Public Maps LandSat Satellite Imagery and Gold Exploration”, Masters Thesis, MIT, 2016

19

4. DECLINING EXPLORATION PERFORMANCE

20

Over the last decade it has become much harder / more expensive to make a discovery

Discovery Rate versus Exploration Drilling & ExpendituresAll Commodities World: 1975-2018

$0

$10

$20

$30

$40

0

100

200

300

400

500

1975 1985 1995 2005 2015 2025

2018 US$b

21

Source: MinEx Consulting © March 2019

Expenditures

Discoveries

Est unreporteddiscoveries

Million Metres

160

120

80

40

0

Metres Drilled

Number of Discoveries

The recent boom in exploration activity failed

to deliver any extra discoveries

The recent boom in exploration activity failed

to deliver any extra discoveries

$0

$100

$200

$300

1950 1960 1970 1980 1990 2000 2010 2020

$200m WORLD

Unit cost per discoveryMineral discoveries in the World : All Commodities : 1975-2018

2018 US$ million

Note: Discoveries based on deposits >=“Moderate” in sizei.e. >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8 , > 10Mt Fe, >20Mt Thermal Coal

No exploration data available prior to 1975Source: MinEx Consulting © March 2019

No data

Estimated cost (includes adjustment for unreported discoveries)

3 Year Rolling Average$235m in 2014

$56m in 2005

22

Between 2005-17 the amount of

expenditure required increased by 3.8x

Between 2005-17 the amount of

expenditure required increased by 3.8x

0

200

400

600

800

1,000

1950 1960 1970 1980 1990 2000 2010 2020

680,000 metres in 2017

WORLD

Unit cost per discoveryMineral discoveries in the World : All Commodities : 1975-2018

‘000 Metres per Discovery

Note: Discoveries based on deposits >=“Moderate” in sizei.e. >100koz Au, >10kt Ni, >100Kt Cu, 250kt Zn+Pb, >5kt U3O8 , > 10Mt Fe, >20Mt Thermal Coal

No drilling data available prior to 1985Source: MinEx Consulting © March 2019

No data

Estimated drilling rate (includes adjustment for unreported discoveries)

3 Year Rolling Average

700, 000 in 2014

237,000 in 2005

23

Between 2005-17 the amount of

drilling required increased by 2.8x

Between 2005-17 the amount of

drilling required increased by 2.8x

5. OTHER FACTORS DRIVINGRESOURCE GROWTH

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Its more than just a game of “discovery”. Engineers and technologists also have a key role to play

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Key Technical Innovations Estimated average operating costs for copper mines in Western World: 1900-2018

2018 $/tonne ore

Sources: Brook Hunt, CRU , SNL, Historical reportsMinEx Consulting estimates (for 1900-1974)

Includes, transportation, smelting & refining and marketing costs

Better Smelting &

Refining

… which opened up the “Age of

the Giant Porphyries”

Airborne geophysics

post-WW2 led to raft of new

discoveries

Expanding demand led to economies of scale

Development of a good

geological model for Porphyries

SXEW

Computer controls ,

modelling and scheduling

Low cost mines in new

countriesBetter work

practicesImproved recoveries

65% to 85%

Bulk mining at Bingham Canyon &

Chuquicamata …

Froth Flotation

Improved transportation

Automation

25

0%

1%

2%

3%

4%

5%

6%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

World

USA

Canada

Australia

Ore grades mined have declined over timeCopper ore grade for World and selected countries: 1900-2018

Sources: USGS, Mudd (2009), Brook Hunt, UBSMinEx analysis of SNL data

6.86%

0.56% in 2018

4.0% in 1900

Note: Rise in ore grade in Australia from 1972 onwards is due to startup of the high-grade Olympic Dam mine

Copper Grade (%)

Estimate

26

QUESTION:

Is a declining ore grade bad news or good news ?

27

There is a trade-off between tonnes and gradeRio Blanco copper deposit

0%

2%

4%

6%

8%

10%

1 10 100 1000 10000

Grade (%Cu-equiv)

Resource (million tonnes)

1100 mt @ 0.58% Cu= 6.38 mt Cu

65 mt @ 1.26% Cu= 0.82 mt Cu

Lowering the cut-off grade grows the resource

= MORE METAL

… lower grades could signify“good” news as …

Source: MinEx Consulting © March 2010

28

There is a trade-off between tonnes and gradeTonnes-Grade data for 48 copper deposits

0%

2%

4%

6%

8%

10%

1 10 100 1000 10000

Grade (%Cu-equiv)

Resource (million tonnes)

Source: MinEx Consulting © March 2010

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There is a trade-off between tonnes and gradeNORMALISED Tonnes-Grade data for 48 copper deposits

0

1

2

3

4

5

0.01 0.1 1

Change in Grade (over Base Case)

Change in Resource size (over Base Case)

On average, by adjusting the cut-off grade, it is possible to double or triple the head grade of the ore body, but at

the expense of shrinking the ore tonnes by a factor of 10

Base Case defined as the maximum reported resource size for a given deposit Source: MinEx Consulting © March 2010

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There is a trade-off between tonnes and gradeNORMALISED Tonnes-Grade data for 48 copper deposits

0

1

2

3

4

5

0.01 0.1 1

Change in Grade (over Base Case)

Change in Resource size (over Base Case)

On average, by adjusting the cut-off grade, it is possible to double or triple the head grade of the ore body, but at

the expense of shrinking the ore tonnes by a factor of 10

Base Case defined as the maximum reported resource size for a given deposit

1.0

2.3

3.5

Curve of “Best-Fit”

Source: MinEx Consulting © March 2010

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CASE STUDY:

Resource growth for the Shahuindo Gold Deposit in Peru

32

0.0

0.5

1.0

1.5

0 50 100 150 200 250 300

Resource (Mt Ore)

Grade (g/t Au)

18 Mt @ 1.14 g/t = 0.65 Moz

182 Mt @ 0.58 g/t = 3.41 Moz

1

3

4

5

2

Moz - isobarsTonnes-Grade Curve (June 2011)

Data: Company Reports 1995 to 2012

52 Mt @ 1.14 g/t = 1.91 Moz

Growth from discovery

Growth from discovery

0

1

2

3

4

0 5 10 15 20

Years after Discovery

0.65 Moz

3.41 Moz

Moz

Growth from loweringthe cut-off grade

Growth from loweringthe cut-off grade

46%

54%

In many cases, the contributions from the engineer are similar in impact to that delivered by the geologist

Shahuindo Gold Deposit: Discovered in 1995

33

• Most deposits have a “halo” of low grade ore surrounding a high-grade core

• The reported size of the deposit will depend on the cut-off grade used

– As a rule of thumb, lowering the cut-off grade by 50%, increases the ore tonnes by 4-8x and the contained metal by 2-4x

– The cut-off grade is driven by economics .... which, in turn, are driven by commodity prices, costs and level of business risk

Changing the cut-off grade has a major impact on the size and quality of the resources available for mining

Costs are influenced, energy & labour-intensity, innovations in mining and processing methods and economies of scaleCosts are influenced, energy & labour-intensity, innovations in mining and processing methods and economies of scale

The ratio varies with the type of depositThe ratio varies with the type of deposit

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Other effects of mining-related innovation on exploration strategy

• New exploration targets

– BiOx allowed the economic development of refractory gold deposits

– SXEW process for oxide deposits fundamentally changed the economics of the copper industry

– InSitu leaching now accounts for 48% World’s uranium production

• Better infrastructure unlocks stranded projects

– Geologists should “follow the road”

6. CONCLUSIONS

36

Conclusions [1/4]

• The number of significant minerals discoveries in the World peaked at 184 in 2010. We are now at less than half that rate

• Over several decades the industry has moved under deeper cover and to new jurisdictions

• 15 Tier-1 deposits were found in the last decade

• Have identified 10 current hot-spots for exploration around the World– Saskatechwan, Ecuador/Colombia, Andes, Brazil, Central Africa, East Africa, Nubian Shield, Central

Europe, China and Pilbara

• In spite of the wealth of exploration tools available, our discovery performance has significantly declined in the last decade.

– 72 key innovations identified since 1950 … but typically takes a decade (or more) for a new technology to become “mainstream”

• Between 2005 and 2017– the cost to make a discovery rose from $56 to $200m (in constant 2018 US Dollars)

– The amount of drilling required rose from 237,000 metres to 680,000 metres

37

3.8x higher

2.8x higher

Conclusions [2/2]

• From a Global Industry perspective the question should be reframed from “how do we find new deposits?” to “how do we grow resources?”

• Innovations in mining and processing make it economic to mine lower grade ore. This substantially increases the resource base

• As a rule of thumb, halving the cut-off grade will increase the ore tonnes by 4x and the contained metal by 2x

• Lower costs and better processing open up new opportunities to explore for (previously) unloved /unrecognised deposits.

38

Key learningA good exploration manager should work together with the engineers and processing technologists to identify new business opportunities

Contact details

Richard SchoddeManaging DirectorMinEx Consulting Melbourne, Australia

Email: Richard@MinExConsulting.comWebsite: MinExConsulting.com

Copies of this and other similar presentations can be downloaded

from my website

Copies of this and other similar presentations can be downloaded

from my website

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