NEWGENGOLD PREVIEW

Deeper thinking needed for gold’s future

Hope Bay (Canada)

Moose River (Canada)

Cascabel (Ecuador)

Alturas (Chile)

Yaouré (Côte d’Ivoire)

Yaramoko (Burkina Faso)

Houndé(Burkina Faso)

Namdini(Ghana)

Sanbrado (Burkina Faso)

Öksüt (Turkey)

Hot Maden (Turkey)

Gross (Russia)

Mount Morgans (Australia)

Dead Bullock(Australia)

Nyanzaga (Tanzania)

Tulu Kapi(Ethiopia)

by Dominic Piper

Gold exploration conference NewGenGold returns to the Pan Pacific Hotel Perth on November 14-15 with another round of case histories from some of the

world’s largest recent gold discoveries.

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For 20 years, NewGenGold has presented gold exploration geologists with the stories of inspiration and perspiration

which go into making major greenfield gold discoveries.

The 2017 edition will showcase discovery case histories from 16 gold deposits. As has been the trend in recent years, West Africa is well represented with seven papers from the region to be presented. Australia, oft-lamented for its poor discovery rates, can boast two papers – Dead Bullock’s Soak and Mt Morgans – the same number as Canada and Turkey.

This year’s keynote opening address will be delivered by Dan Wood former exploration manager of Australian gold giant Newcrest Mining Ltd. Ahead of the conference, GMJ spoke to Wood about the future of the gold mining industry and the role exploration will play in it.

A consistent theme through recent forums has been the alarming fall in the rate of discovery, particularly since the last exploration boom of 2005-2012.

MinEx Consulting’s Richard Schodde estimates that less than 50% of total exploration expenditure was recovered in the value of reported discoveries during the period; the industry is not delivering investors bang for the buck.

Wood believes the post-2005 period will be remembered as one of economically unacceptable outcomes for the gold industry and argues the only way to reverse the loss of investor confidence is to transform the business of gold exploration.

“The rewards didn’t justify the unprecedented levels of expenditure,” Wood says. “The obvious solution is to demonstrate that gold discovery is a business, where the wealth created by finding new orebodies far exceeds that outlaid by their discovery.”

According to Wood, the only way to achieve this is by redesigning the gold exploration business model.

“The oil and gas industry long ago recognised the crucial importance of exploration and discovery to the industry’s performance but the metals mining industry is yet to acknowledge it. In metals mining, there is a general absence of geologists in very senior positions in larger mining companies and on their boards. It is only in the junior sector that geologists have some control, but those companies lack funding which limits their ability to chase large deposits.

“The heavy reliance on junior exploration companies presents an issue in transforming the business of gold exploration, unless there is a greater pooling of financial resources. In effect, junior gold explorers will need to find a way of replicating the oil and gas industry’s approach to funding exploration, where several companies share the risk.”

The necessity for a new business model becomes more acute as exploration heads deeper, as Wood believes is inevitable.

“Deeper is the new greenfield territory and exploring deeper than 300m is the only certain way, in my opinion, to transform the business of gold exploration. And, it is essential that gold explorers develop and implement a new deeper-discovery exploration approach and business model. The alternative to conducting exploration as a business is gambling that a

discovery will eventually come, if one gets lucky. This is not a saleable approach to investors.”

Developing an appropriate business model is one challenge but it must be married to an ability to understand what makes an economic orebody.

Wood argues the growth in the use of computers and “big data” and the rapid corporatisation of exploration has come at the expense of creative thinking, a trend which hampered discovery

rates in the post-2005 period.

“At a time when this and lateral thinking were crucially important to discovery, explorers were deprived of the time to think because of corporate demands that ultimately destroy wealth. Important thinking was not done when it was most needed, post-2005, and the outcome of this was predictable.”

He also rails at any suggestion big data will prove a panacea to gold’s discovery rate problems.

“The solution rests with better exploration thinking, using the relevant data, not using all the data available. A computer is not the answer to discovering ore.”

He also warns explorers that clearly understanding the economics of discoveries will be crucial as exploration heads deeper. Wood believes only explorers who demonstrate a greater appreciation of mining methods will ultimately achieve the goal of orebody discovery.

“Deposits which are discovered deeper than 300m below surface will almost certainly have to be mined by an underground method so it is essential the exploration business model is built around a solid understanding of the constraints applying to underground mining. It will require a much more sophisticated understanding of mining constraints and successful explorers will be those who understand the different methods of underground mining, particularly caving.”

The obvious solution is to demonstrate that gold

discovery is a business, where the wealth created by finding new orebodies far exceeds

that outlaid by their discovery.

“

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