Examining risk in mineral exploration

Singer, Donald A. and Kouda, Ryoichi (1999) Examining risk in mineral exploration. Natural Resources Research, 8 2: 111-122.

Author Singer, Donald A.
Kouda, Ryoichi
Title Examining risk in mineral exploration
Journal name Natural Resources Research   Check publisher's open access policy
ISSN 1520-7439
1573-8981
Publication date 1999
Sub-type Article (original research)
Volume 8
Issue 2
Start page 111
End page 122
Total pages 12
Editor D. F. Merriam
Place of publication New York
Publisher Kluwer Academic / Plenum publishers
Collection year 1999
Language eng
Subject C1
640200 Primary Mining and Extraction Processes
290700 Resources Engineering
Abstract Successful mineral exploration strategy requires identification of some of the risk sources and considering them in the decision-making process so that controllable risk can be reduced. Risk is defined as chance of failure or loss. Exploration is an economic activity involving risk and uncertainty, so risk also must be defined in an economic context. Risk reduction can be addressed in three fundamental ways: (1) increasing the number of examinations; (2) increasing success probabilities; and (3) changing success probabilities per test by learning. These provide the framework for examining exploration risk. First, the number of prospects examined is increased, such as by joint venturing, thereby reducing chance of gambler''s ruin. Second, success probability is increased by exploring for deposit types more likely to be economic, such as those with a high proportion of world-class deposits. For example, in looking for 100+ ton (>3 million oz) Au deposits, porphyry Cu-Au, or epithermal quartz alunite Au types require examining fewer deposits than Comstock epithermal vein and most other deposit types. For porphyry copper exploration, a strong positive relationship between area of sulfide minerals and deposits'' contained Cu can be used to reduce exploration risk by only examining large sulfide systems. In some situations, success probabilities can be increased by examining certain geologic environments. Only 8% of kuroko massive sulfide deposits are world class, but success chances can be increased to about 15% by looking in settings containing sediments and rhyolitic rocks. It is possible to reduce risk of loss during mining by sequentially developing and expanding a mine—thus reducing capital exposed at early stages and reducing present value of risked capital. Because this strategy is easier to apply in some deposit types than in others, the strategy can affect deposit types sought. Third, risk is reduced by using prior information and by changing the independence of trials assumption, that is, by learning. Bayes'' formula is used to change the probability of existence of the deposit sought on the basis of successive exploration stages. Perhaps the most important way to reduce exploration risk is to employ personnel with the appropriate experience and yet who are learning.
Keyword Risk
mineral exploration
decision-making
mineral economics
mineral resources
risk assessment
Bayes
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Mechanical & Mining Engineering Publications
 
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Created: Tue, 10 Jun 2008, 14:28:43 EST