by Louis Fourie, Owner & Principal at Terra Modelling Services Inc.
A few months ago, there were industry indications that many commodities were beginning to return to a growth phase. Companies were positive, drill rigs were busy, and analytical labs were being inundated with samples. How quickly things change.
The question remains as to how long will it take to return to, or surpass the pre-pandemic state, and what lessons can we take from the current situation to apply to our industry? Some predict we will see a rise in virtual meetings as opposed to individuals flying absurd distances for what amounts to a few hours. Others anticipate additional accommodations for staff who need to work from home. Will there be a rush to switch to testing and using technology for future business continuity plans? While these are relevant points to ponder, what can our industry do during this event, and in preparation for the future? Perhaps now is the time to consider what it means to discover a resource, drill it, and transform that resource into an economic success story.
Definition
Is a resource just a lot of concentrated minerals or metals above some theoretical, calculated cut-off grade aligning with Joint Ore Reserves Committee’s (JORC) ‘reasonable prospects for eventual economic extraction’? Beyond this singular definition is demand. A resource can only be deemed so if it can be sold for more than it costs to mine, process and deliver, and a customer has contractually agreed to purchase. Gold is one of the only commodities that remains a solid stock market investment– everything else is a ‘pipe dream’ (pun intended). Simply put: don’t haul a drill rig onto a site unless you have a confirmed and detailed plan to sell the end product. This is especially relevant to the ‘sexy’ or popular minerals of the day – graphite, cobalt and lithium.
It’s important to uphold three factors for success: mining, processing and delivery. However, a local, low-grade deposit with high mining costs could prove more cost-effective than a high-grade deposit on the other side of the world, with lower mining costs. And in some cases, processing is a greater cost than mining – lithium being a prime example.
Rethinking exploration
Investment will be restricted for some time, so let us reconsider what it is that we want to extract from an exploration project – literally and figuratively. This is not a new concept by any means, having been involved with both junior and multinational exploration companies for over two decades, yet right now, it seems relevant. Exploration is often regarded as a checklist – when funding or investment slows, exploration stops. When the commodity price rises; exploration booms. Markets are volatile and often unresponsive despite every resource – time, money and work invested into discovering a new deposit, including defining a reserve and developing a mine. It’s anything but a guarantee for monetary success, or an obvious way to build investor confidence. Encouraging investment in a depressed market is problematic, particularly from a psychological perspective, yet it can be ameliorated by targeted spending.
I was introduced to the concept of object-oriented programming back in my student days, and it simply means to streamline and remain focused. An amended exploration program should use every available tool for efficiency. Let me provide an example of a program outline such as remote sensing analysis. When prospecting for target areas, multispectral and hyperspectral analysis of satellite data can be applied over a broad area identifying alteration anomalies, structural analysis and vegetation anomalies. It is a powerful tool when paired with existing data or previous field work for a first pass look, or when seeking additional confirmation of potential targets. Prospects can then be revisited using remote sensing with targeted geophysics – fixed wing for large areas and drone geophysics for smaller targets. Both time and money are saved avoiding unnecessary passes over expansive areas, and the saved dollars can be banked for future exploration expenses, or applied to tighter line spacing. Targets and target areas must be clearly defined before boots are allowed on the ground to undertake mapping, soil, outcrop and channel sampling (if appropriate), and then drilling.
The time to start new exploration is when markets are low, such as right now. Skipping ahead to drilling to try and elevate the share price is tempting, but it is the less optimal approach long-term, in terms of exploration success and cashflow. Adopting a thorough approach ensures that exploration continues through difficult financial situations, shortening timelines, and possibly reaching production before the next market cycle.
Economic context
We depend on financial markets yet they are fickle. Understanding market cycles and the impact of commodity prices and exchange rates is essential, as mining projects can either thrive or suffer as a result of their fluctuation. Understanding these impacts before embarking on a project is critical. Our current situation and history suggest we need to rethink our methodology and adapt. Understanding industry context – economic, social and environmental, while adjusting spending behavior will assist in locating and defining resources for economic success in a brave ‘new’ world.
About the author
Louis Fourie graduated from the University of Johannesburg, South Africa, with a BSc (Hons) in Geology in 1996.
He has 20 years of experience in resource estimation, modeling and exploration support. Louis started Terra Modelling Services Inc. (TMS) in 2014. Prior to TMS, he worked for De Beers, Shore Gold (now Star Diamond Corp.) and North Rim Exploration. He has experience in the entire value chain, with particular emphasis on exploration support, modeling and resource estimation. He is also experienced in a wide range of commodities, including diamonds, boron, potash, phosphate and lithium (brines and clay).
TMS is a geological consulting company with highly experienced staff, providing an array of services to the mining and exploration industry. TMS can provide geological consulting, exploration management, satellite remote sensing, contract geological services, corporate risk and marketing analysis, and community relations. The TMS team consists of geologists, resource professionals, project managers, data management and community relations professionals.
To obtain specific details on how TMS team can help you, please visit: www.terramodellingservices.ca
