Over the past few decades, the old adage “grade is king” has been gradually replaced with “big is king”. There are a number of justifiable (at the time) reasons for this but the end result is a global accumulation of generally large and low grade mineral occurrences. Compounding the grade-challenged character of many of these occurrences is the fact that they are increasingly discovered in geographically difficult locations, e.g. remote areas, high altitude, rain forest, adjacent to glacial ice, etc.

There are many mineral projects in a number of commodities that stand little chance of advancing to mining because the return characteristics and risk profiles will not justify the required capital expenditure, let alone any purchase price expectations on top of that. These projects cannot withstand the rigors of commodity price cycles and the tortuous, time-consuming and expensive pathway that must be navigated before they can become fully permitted, financed and socially accepted in today’s world.

Perhaps it’s not the case that the mineral exploration industry lacks discovery, but rather that we are discovering the wrong things.  In addition, lack of technical and economic discipline too often means that these discoveries are drilled-out and even advanced through feasibility, when in reality the project should have been stopped early-on. This degrades exploration performance over the long run and wastes capital that could be deployed to discover higher-quality deposits.

In an urbanizing world that will continue to require increasing quantities of minerals and metals, there is an opportunity for well-managed mining and exploration companies to develop profitable enterprises by discovering and extracting high-quality mineral deposits. Our view is that this presents a major opportunity for mineral explorers to re-focus and learn how to target for and discover higher-quality deposits. Higher-quality does not necessarily imply smaller size, but in most cases it does imply higher grades and/or multiple metals.

Of course this is easy to say and not so easy to do. The challenge is to create conditions that generate, nurture and fuse a combination of skill, learning, discipline, luck and patience to achieve a discovery track record that delivers significant new wealth. Companies and exploration groups who accept this challenge and excel will be the mineral exploration success stories of the future.

In the mineral exploration industry, we accept the reality that the probability of greenfield discovery success is usually less than 1%. In non-statistical terms, we say that significant technical risk confronts each promising, untested, geologic idea/opportunity/prospect.

An additional reality, however, is that the probability of economic success for each geologic prospect is even lower than the probability of discovery success. Some say that the probability that a good geologic prospect will actually become a world-class mine is less than 0.01%. This significant economic hurdle is often due to the non-technical uncertainties and risks (community, security, title, environmental, political, etc.) that could, and probably will, have an adverse impact on economic value as the geologic prospect moves through the exploration stages.

 These statistics put a premium on the quality of the process that the explorationist uses to gather and assess the non-technical (non-geoscientific) information that is relevant to testing and (hopefully) developing and producing what starts out as a promising greenfields opportunity. At WMS, we call this process Commercial Risk Management (CRM).

It is not sufficient for the mineral explorationist merely to have a placeholder for CRM. The actual CRM process must be performed efficiently and with skill and objectivity. It must be tailored to each project so that the information gathered is complete, accurate, and useful for that particular project. It must be grounded in the assumption that the quality of the CRM result makes a significant difference in the effort to expand exploration search space and increase the probability of economic success for technically sound greenfield opportunities.

Most important, the CRM process must yield value, and to do so the explorationist must see CRM for what it really is: a core component of the mineral exploration process that continues throughout the project life as the stakes get higher and the need for informed decision-making increases.

CRM does not always have this stature, and the result is CRM failure that leads to project failure, or project delay that is tantamount to project failure. WMS strongly believes that project delay or failure, and accompanying value destruction, can be largely avoided through a well-designed, resourced and implemented CRM process that is an integral part of any exploration strategy and business plan.

The ultimate goal: Avoid pursuing projects that cannot become viable mines despite technical exploration success.