Mining Explorer

Exploration tips from the best in the business

Dan Wood led Australia’s Newcrest Mining’s exploration team during a time when Newcrest was considered the world’s most successful gold explorer (1992-2005). His top discovery enhancers are summarized below.

Good Science
A solid foundation in the principles of geology combined with broad experience in mineral resource geology is the bare minimum. Geoscientists must also understand the mining process and appreciate the non geological factors that determine the economics of a deposit.

Experience + Intuition + Perseverance
It takes at least ten years for a geologist to become competent. The resulting experience leads to the kind of intuitive thinking that is crucial to a job where there is so little evidence to guide the discovery process. Persevering and acting on that intuition offers the best chance of reward.

Discovery Culture
There must be a discovery culture within the company that allows the exploration team to act with autonomy, a quality lacking in many mining companies where the focus is on the commercial aspects of the business.

Serendipity and People
Serendipity, or “the making of happy or unexpected discoveries by accident or when looking for something else”, is more important than luck where exploration is concerned and is more likely to happen to those who have made previous discoveries.

Strategy
A major component of strategy is risk. Exploration risk progresses from moderate (seeking an extension to a known deposit) to very high (grassroots exploration in a mineral belt). Woods prefers to work at the moderate end of the spectrum, where the odds – about 1 in 5 to 10 – are considerably better than “rolling the dice.”

Philosophy
Woods main philosophy is that orebodies can be made and mineralization turned into ore, providing the geoscientist is skilled enough to recognize what needs to be done to bring about that transformation. The geoscientist who is able to find what escaped the attention of others is the most likely to uncover deposits in areas that have been picked over in the past.

Striking the right balance between reckless and irresponsible behavior and reasonable risk taking, however, requires the ability to visualize the discovery target when planning exploration. An appreciation of the dimensions of the deposit, for instance, allows for bold step out holes that can quickly determine if the deposit is large enough to pursue.

Creativity and Visualization
Perhaps this skill should be at the top of the list because Wood believes the ability to see the target in three dimensions is “the ultimate key” to discovery. He encourages geologists to use deposit models hand-in-hand with a 3-D dartboard visualization in which the ore is the bull’s eye and the encircling rings represent mineralized waste, then altered waste, then unaltered host rock in the outer ring.

A Systems Approach
Thinking of the target as a dynamic system that affects the geology around it, or “thinking like an orebody” can help geoscientists interpret and understand seemingly disparate pieces of evidence.

Drilling
Woods advocates spending 40-60% of the exploration budget on drilling, the only measurable quantity in his list, and argues that it is better to overdrill a deposit than encounter unpleasant surprises once mining begins. On the other hand, he says an anomaly needs to be detected only once, not repeatedly using multiple techniques, in order to be drill worthy.

For a more detailed report see Issue #80 of the Society of Economic Geologists (SEG)  newsletter http://www.segweb.org/login.aspx?page=/publications/mo_newsletter.aspx (accessible on-line to SEG members only).

Networking for the Lonesome Fieldie

Freelance writers and field geologists have a lot in common. They spend most of their time in isolation, missing out on the serendipity of face to face interactions with others who might provide fresh insight or help them to do their jobs better.

That’s why, as a freelance writer and former exploration geologist, I would encourage all fieldies to join LinkedIn linkedin.com to take advantage of what the business networking site’s “Groups” have to offer. Founded in California in 2003, LinkedIn has more than 65 million users in 200 countries representing most industry sectors. As someone who writes about mineral exploration, commodities, and mining, I have found Groups such as the Geologist Network, GIS in Geoscience, and Mineral and Metals Professionals Globally, and Mining: Exploration & Geology invaluable sources of information and feedback.

Sometimes, this type of on-line networking can reap personal benefits.  Through a series of serendipitous exchanges, for instance, a member of Metals Professionals Globally helped my husband, a Canadian geologist, find accommodation and logistical support for the Comrades marathon in South Africa. Roger was running the 89 km race for the first time this year so he needed all the advice and help he could get.

To join an LI group, just establish a profile, click on “Groups Directory” and enter a keyword such as “exploration” or “geophysics.” You’ll find that there are several groups available depending on your specialty or area of interest. Many of these groups vet requests before allowing membership, so you know you are dealing with credible professionals.

Some lament the increasing popularity of on-line social networking, arguing that it is replacing important face to face contact with something less rewarding. But for those of us who spend a great deal of our time alone because of the nature of our jobs, sites like LinkedIn provide a connection to like-minded colleagues around the globe who are usually happy to answer questions and share expertise.

By going a step further and joining Groups, you will be able to target your queries or announcements even more, ensuring that your message gets to the right people at the right time.

Reports of prospecting’s death are greatly exaggerated

When the prevailing wisdom is that “anything worth finding near surface has already been found”, especially in the developed world, it is heartening to know that Canadian discoveries are still being made using old-fashioned prospecting. 

Two new finds in particular come to mind: one a PGE deposit just an hour’s drive from the city of Thunder Bay in northern Ontario, the other a gold deposit in central Yukon where gold has been panned from streams for decades, but hardrock sources remained elusive.

In the first case, devoted field geologist Graham Wilson was investigating the boulder fields around Current Lake north of Thunder Bay in 2001 when he had the hunch to crack open one of the peridotite boulders. What he found inside was impressive PGE mineralization that warranted follow up.

Wilson contacted Australian Keith Watkins, his former graduate colleague at Cambridge University, who optioned the property through his junior company Magma Metals. Magma traced the boulder train up-ice back to its original source and started drilling.

Since then, Magma has outlined an indicated resource of 4.6 million tonnes grading 2.88 grams per tonne platinum equivalent (PtEq) and an inferred resource of 3.6 million tonnes grading 2.29 grams per tonne PtEq. The Thunder Bay North project is still growing.

The second example is Underworld Resources’ White Gold deposit in the Yukon. The day after president Adrian Fleming presented the find at the Prospector’s and Developers popular “New Discoveries and Developments” session in March, major gold miner Kinross Gold Corporation announced that it would pay a premium of 36% over the closing price of Underworld to get its hands on White Gold and its 1.5 million ounce gold resource.

Dawson City prospector Shawn Ryan, recently named British Columbia and Yukon prospector of the year for his work, started systematic soil sampling on the White Gold property in 2003. By the time Underworld optioned the claims in 2007, four thousand samples had uncovered six discrete gold anomalies at a threshold of 50 ppb Au.

Follow-up mapping, trenching, IP geophysics, and detailed soil samples confirmed previous work and returned grades of up to 1.8 g/t Au over 40m in channel samples. Subsequent drilling intersected the Golden Saddle and Arc deposits, both near-surface bulk tonnage zones potentially amenable to open-pit mining methods and open to expansion.

Both Magma and Underworld hail from Australia, where there is equal concern that all the “easy” deposits have been found. But as the Aussie juniors have demonstrated, it never hurts to take a second look on surface, even in someone else’s backyard.

“I’m completely blown away by the fact that all the creeks in the White Gold area have placer gold mining,” says Fleming. “But there has not been a single hole drilled for 50 kilometres in any direction.” 

Chinese Investment Targets Canadian Resources

Canadian energy and mining companies have a history of encouraging other countries to open their doors to Canadian investment. They argue that global resources, especially those in developing countries, badly need the expertise and access to capital that Canada has to offer. In return, enterprising Canadians provide local jobs and generate tax dollars, sometimes even build a school or a hospital. It doesn’t always work out that way, but that’s the idea. 

So how do Canadians react now that the tables are turned and foreign investors – namely China - are gobbling up Canadian resources as fast as you can say “state- sponsored capitalism?”

China has gone from being a net recipient of foreign investment in its mining industry to being net investors abroad. The impact has been swiftest and greatest in Australia, where the Chinese have spent more than A$18 billion in the past 18 months, mostly on resource projects, to become the third largest foreign investor in the country behind the United States and Britain.

But the dragon’s fiery breath extends much further. Over the summer, the China Investment Corporation (CIC) bought a major equity stake in Teck, Canada’s biggest base metal producer and PetroChina International purchased a 60% share of the Athabasca Oil Sands Corporation’s MacKay and Dover  projects for $1.9 billion.

Those two high-profile cases received a lot of media attention, but Chinese companies are also targeting Canada’s beleaguered junior mining sector while they can still get bargain basement access to the next generation of deposits.

The latest transaction is the purchase of a 15% stake in Royal Nickel Corp., a privately held junior led by former Inco executives, by China’s largest nickel trader. The prize is the Dumont nickel project ear Val d’Or, Que. Royal Nickel’s management is apparently delighted with the $22 million infusion of capital and has dismissed concerns that China is gaining too much control over Canadian resources. Chairman Scott Hand, ex -CEO of Inco, told The Globe & Mail that “Canada  has to get used to that.”

In November, Jien Canada, a partnership between China's Jilin Jien Nickel Industry Company and Vancouver's Goldbrook Ventures hoped to wrap up a $192 million bid to purchase cash-strapped Canadian Royalties and its Nunavik nickel project. One of the deal’s last hold-outs was Canadian Royalties CEO Glenn Mullan, who said he won’t tender his shares until Jien agrees to continue community initiatives the junior negotiated with the Inuit. Jien already holds a 51% stake in Edmonton-based Liberty Mines and a 15% stake in Toronto-based Victory Nickel.

Will Chinese companies be willing to play by our rules, especially if they negotiate majority stakes in our mining and energy resources? It wasn’t so long ago that a Chinese-backed company raised the ire of labour unions in B.C. by proposing they would be bring 400 workers from China to mine their coal deposit in the province. Could Chinese wages for Canadian miners be next?

The Clock is Ticking

If you can imagine the exploration boom-bust cycle as a clock with the bust at 12 o’clock and the boom at 6 o’clock, we are now sitting between two and three o’clock, when junior companies unable to raise cash since the bust of mid-2008 get desperate.

As they scrape the bottom of their treasuries, teaming up with cash-rich juniors to advance their projects begins to look like an attractive means of survival. Consolidation of the sector begins.

We’re already witnessing this phase on Toronto’s TSX Venture Exchange, the world’s largest bourse for junior mining companies. Several high-profile mergers have been brewing over the traditionally slow summer months: Mano River Resources is offering to buy African Aura Resources and its advanced stage gold and iron projects in Cameroon; Hathor Exploration is paying a premium over a competing bid for Northern Continental Resources in order to acquire control of the Russell Lake uranium project in the Athabasca basin of Saskatchewan; Orvana Minerals is set to buy Kinbauri Gold Corp. and its assets along the Rio Narcea gold belt in Spain; and directors from Lundin Mining are attempting to oust the board of Chariot Resources and wrest control of the company and its Mina Justa copper project in Peru.

Sector consolidation will mean fewer opportunities for geoscientists in the short term but is ultimately good for the industry: rather than have several companies limping along with good projects but no money to develop them, there will be fewer but stronger companies in a better position to take advantage of the next boom to reward their shareholders and employees.

The bust phase is characterized first by declining exploration, then by mergers involving share exchanges (e.g. Mano River-African Aura and Hathor-Northern Continental), and next by a rise in cash takeovers (e.g. Orvana-Kinbauri).

Finally, when new companies start launching IPO’s and floating their shares, you know the boom has begun in earnest.

Hang in there. Only a few more hours to go!

India, the last frontier?

It’s no secret that India is rich in minerals. But unlike most nations blessed with resources, the country has a history of discouraging foreign investment in mineral exploration. Even as jurisdictions in Africa, South America and Southeast Asia cozied up to foreign investors in the 1980s and 1990s, India remained a no-go zone.

Those who did dare to tackle the byzantine world of India’s mineral tenure system were quickly discouraged by endless paperwork and bureaucracy. And without foreign capital, lots of mineral potential simply remained in the ground.

That may be about to change as the Indian government tables a new mining policy. While nobody should be holding their breath (changes have been called “imminent” several times since India formed a high level committee four years ago to review the country’s 1993 National Mineral Policy and its 1957 Mines and Minerals Act), the new regulations would streamline foreign direct investment in non-coal metals and minerals exploration.

Several Canadian and Australian companies have expressed an interest in setting up camp in India provided the law is changed to make exploration feasible. One change, for instance, would see the Geological Survey of India (GSI) – currently responsible for most of the exploration in the country - provide internet access to all of its data, maps and reports. Another proposal would substantially increase the area covered by a reconnaissance exploration permit to 5,000 km2, making aerial geophysical surveying more cost-effective.

According to Business Monitor International, which is optimistic that the mineral policy will change radically enough to attract foreign investors, India’s mining industry is expected to grow at an average annual rate of 8.1% over 2008-2012, to be valued at US$74.6 bn by 2012.

As mineral resources worldwide become increasingly scarce and harder to find, India may be about to open a whole new frontier that has hitherto been underexplored and underdeveloped. Juniors and seniors alike should be watching political developments in India closely and be ready to act when the time is right.

Tomorrow’s Leaders

Just over a year ago, I heard from a reputable source that a large mining company was plucking geology students out of third year at a Canadian university and offering employment at the same salary a qualified geologist would earn. The offer was tempting, and a few abandoned their studies to pursue the opportunity. But I wonder what has become of them? Are they victims of the wave of layoffs that have hit the mining sector? And, if so, will they ever return to their geoscience studies after seeing just how cyclical the mining industry can be?

Enrollments in undergraduate geoscience programs have been increasing in lock step with growth in the mining, oil and gas and environmental sectors. For the 2008-2009 academic year, enrollment in the U.S. jumped 8% to 22,191. Students in Texas A&M's department of geology and geophysics doubled in two years, mostly because of pent up demand in from oil and gas companies. Canada has witnessed similar increases since 2003 and enrollment in this country now stands at about 3,000. 

Graduate studies in geoscience, on the other hand, have levelled off in both countries because of lack of funding. If the resource sector wants the growing crop of undergraduates to be available to them down the road, they might consider funding more graduate students so that there will be a pool of highly-qualified geoscientists ready to enter the workforce when the good times return. 

Otherwise, as we have seen so many times before, the resource sector’s future leaders and innovators may drift to other sectors because they can’t find jobs in their chosen profession. And the human resources shortages witnessed just a couple of years ago will seem like a bounty in comparison.

Delving into the Geoblogosphere

The geoblogosphere is a growing and diverse collection of commentary on the world of geoscience: what’s new and fascinating as well as ongoing debate about topics such as how the K-T boundary formed, what geoscientists should know before they graduate, and essential equipment for the field. The blog community is dominated by academics, mostly American, with input from exploration geoscientists as well as bloggers aligned with the production side of the minerals industry. Here are some of the more active sites:

The Accretionary Wedge
http://theaccretionarywedge.wordpress.com

If you are just delving into the geoblogosphere for the first time, this is a good place to start. The Accretionary Wedge is a geoscience blog carnival hosted by a different blogger each month that focuses on a theme determined by the host. A recent topic, for instance, was what places and events geologists should see and experience before they die (http://geotripper.blogspot.com/2009/02/accretionary-wedge-16-is-one-life.html). Bloggers have also discussed some fascinating applications of geology in art (painting, literature and music) at http://gmcgeology.blogspot.com/2008/06/accretionary-wedge-10-geology-in-art.html and have waxed poetic about their favourite places for field work (http://theaccretionarywedge.wordpress.com/2008/12/11/the-accretionary-wedge-14-favorite-places-for-field-work).

All of My Faults Are Stress Related
http://scienceblogs.com/stressrelated/

Kim Hannula is a geology professor specializing in structural geology at a public liberal arts college in the U.S. Rockies. Her focus is on teaching methods and curriculum for undergraduate geoscience students. Posts share ideas about course design, delve into geologic history and link to her favourite academic papers and Twitter posts about geology. She also welcomes and receives suggestions on teaching strategies. Hanuala posts every couple of days and generates lively discussion on her blog.

The Geology News Blog
http://geology.rockbandit.net

As it title would suggest, this blog claims to have “the latest and greatest news in geology from around the world.” The site is authored by Americans Dave Schumaker, an environmental geologist, Peter Polito, a graduate student of planetary geology and Ron Schott, an assistant professor of geology at Fort Hays State University in Kansas whose primary research interests are hard rock petrology and tectonics. While the blog’s main purpose is to serve as the place to go for geology-related news and images, the trio also provides commentary on everything from climate change to paleontology.

Schott also has his own blog, http://ron.outcrop.org/blog/, where he posts gigapans (high-resolution images stitched together to form a detailed panorama) from the field and highlights the latest developments in Google Earth and other geology-related technologies.

I Think Mining
http://ithink.mining.com

Jack Caldwell is a civil engineer in California whose career focused on designing tailings dams for mines in North America. He provides news about the mining industry, as well commentary on the politics of mining and major industry events such as the annual PDAC convention in Toronto.

Republic of Mining
http://www.republicofmining.com

This blog may be of interest to mining and economic geologists, especially in Canada. It is designed to raise awareness among the media, the general public and political decision makers about the economic and social benefits of mining. The author, Stan Studol, is a self-described “Inco Brat” born and raised among the nickel mines of Sudbury, Canada.  He regularly posts commentary by experts from all walks of the Canadian mining industry.

Looking for Detachment
http://highway8a.blogspot.com

As a former field geologist, this blog is one of my favourites. The “Silver Fox” is an exploration geologist working in the western U.S.  She comments on her days in the field, including what works and what doesn’t in terms of field gear and technology (e.g. using GPS), but you can also get advice on where to find a good beer in say, Anchorage, Alaska or where to find a major gold deposit in two million years time. The Silver Fox is a skilled photographer who blends her text with images of rocks, creatures and other intriguing subjects encountered during the workday.

Geotripper
http://geotripper.blogspot.com

Garry Hayes teaches geology at Modesto Junior College in California and is the past president of the National Association of Geoscience Teachers, Far Western Section. His write-ups focus mainly on  the field trips he leads in the Western U.S. but also include a few light-hearted gems such as “The Fully-equipped Geology Student” (http://geotripper.blogspot.com/2009/03/fully-equipped-geology-student.html),  a humorous take on how the typical student field geologist presents.

Highly Allochthonous 
http://scienceblogs.com/highlyallochthonous

Chris Rowan is a geologist specializing in paleomagnetism at the University of Edinburgh and travels around the world practicing his craft. His posts are wide-ranging, including comments on academic life, volcanoes and earthquakes, and rugby. He also speculates on controversial theories such as “Peak Coal”, the idea that the world will be reaching the end of its coal reserves within the next half century. 

This is far from a comprehensive list of geo-blogs. There are new sites popping up every week. Some are more active than others, some come out of the academic world while others are more industry related, some specialize while others generalize, but all bring the geoscience community together just as we are trying to do here at Earth Explorer. Please send us your favourites!

The Minerals Market: Restoring faith in the long-term fundamentals

When it comes to the annual commodity forecast sessions, the March PDAC convention can be counted on to gather an eclectic group of market commentators, some with controversial views.

This year, speakers from New York, London, Australia and Toronto converged at the Metro Toronto Convention Centre on the first day of March to confirm metals investors’ worst fears, prepare them for a little more pain, and restore their faith in the long-term fundamentals.

The speakers focused on the supply side of the equation, easier to predict than metal demand. Most assumed demand would improve sometime in the next couple of years, though no one was brave enough to stamp a date on that assumption.

Perhaps the most surprising message was delivered by Jim Steel of New York-based HSBC Securities, who took a dim view on gold, the one metal that has sustained investors and junior explores alike. Steel’s underlying premise for his bearish outlook is that the world is entering a period of deflation, and gold does not perform well during deflationary periods.

The "incredible choking off" of jewelry imports, especially to India, because of high prices of US$900-1000 per oz. will also continue to be a drag on gold.

Steel said the majority of money going into the gold market now is looking for a safe harbour as opposed to price appreciation. The same motivation is driving investors into the U.S. dollar. But Steel thinks the two monetary instruments will begin to uncouple and return to their traditional inverse price relationship and that, as credit becomes more available, there will be less investment in gold.

On the other hand, copper may be set to rally again, mostly because production growth has been so low over the past decade, even in the high price environment of the last five years, said Andrew Keen of London-based Sanford C. Bernstein, who identifies himself as a "traditional copper bear gone bullish". Grades at major operations are plummeting, exploration has failed to produce any significant new deposits, and disruptions related to labour and earthquakes continue to keep production in check, all supporting price increases.

Meanwhile, marginal cash costs are creeping upwards because credits from molybdenum, a common by-product of copper mining that has experienced plummeting prices, are falling. We have not yet reached the point of "maximum bleakness" when it comes to copper and things will get worse before they get better, but they will get better, Keen reassured his audience.

If Tom Kendall of Mitsubishi Corp, Japan’s largest trading company, is correct, the future for platinum is also bright even though the beleaguered auto industry accounts for 60-65% of the demand for platinum. As prices for the precious metal have dropped in tandem with other metals, price-sensitive jewelry demand has picked up some of the slack. More importantly, hedge funds still like platinum’s fundamentals, especially when it comes to supply. 

Similar to the copper industry, grades at major platinum operations are plummeting (Anglo Platinum has witnessed an average grade decline of 5.5 gpt to 3.7 gpt over the past decade, for instance), lack of power supply will continue to disrupt operations in Southern Africa for years to come and costs rose 25-30% at some mines last year. Although the market could remain volatile as nervous investors liquidate positions, Kendall believes we have left the market low of US$744 per oz. behind and that prices are unlikely to remain below US$1,200 per oz. for long.

Meanwhile, the uranium market is in a "stalemate", with utilities sitting on a year’s worth of supply and unwilling to lock into long-term supply contracts. The price is also vulnerable if the U.S. Department of Energy proceeds with plans to sell its excess uranium at a rate of up to 67 million pounds per year, says Greg Barnes of Toronto-based TD Newcrest. 

But mine supply hinges on couple of megaprojects that are in doubt. Barnes believes BHP Billiton will not complete its $15 billion expansion of the Olympic Dam mine in Australia until 2015 at the earliest, while new taxes being introduced in Kazakhstan may curtail production from that country. With India becoming a new buyer, the longer term fundamentals of uranium look "very good" says Barnes.

The overall message on metals was that gold, the commodity star most people expect to keep on shining, may have seen its best days, while copper, platinum and uranium – though vulnerable to further declines in the near future – are a good buy for the long term.

Closing the discovery gap

As the economic downturn curbs investment, explorers are delaying drill projects and they’re taking more time to really look at the data before spotting drills.

That’s exactly what we should be doing in good times and bad, according to researchers at McMaster University’s School of Geography and Earth Sciences.

In the article, Closing the Discovery Gap, McMaster Professor Bill Morris and Research Scientist Hernan Ugalde suggest that spending more time on analysis and modeling may be just what’s needed to close the widening gap between rising mineral exploration costs and declining discovery rates.

The new frontier, says Morris, is the integration of geoscience information.

New integrated approaches are pushing the envelope in Oil Exploration, according to Oil Companies and Consultants profiled in Earth Explorer’s Oil Exploration Feature

In Canada, the federal government committed $25 million over five years to find new base metal reserves in established mining communities. One of the main components of the Geological Survey of Canada’s Targeted Geoscience Initiative (TGI) is the integration of industry and government data collected over the years to create new images of old camps with the hope of discovering previously undetected ore.

The private sector can also get smarter and more efficient in how it deals with exploration data to make new discoveries. Junior companies in particular may be missing the opportunity - for lack of knowledge and/or manpower - to use technology in their favour.

“It’s the difference between brute force and finesse in exploration,” says Morris. “Should you put more money into boreholes, or should you be spending a little more money and time trying to formulate a model?

According to Ugalde and Morris, increased access to data and the technology to process high volumes of data in meaningful ways are two main ingredients in the new search for mineral deposits. Training is the third.

Their advice: hire the expertise required to analyze your data properly, especially in this era of non-stop data generation.

The old days when prospectors could go out there and find a mineral deposit on the surface are gone. But closing the discovery gap may be possible, if explorers take full advantage of their human, data and technology resources to expand their search into deeper areas.