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EXPLORATION & DEVELOPMENT
AND
MINING
THE NEW PARADIGM
David J. Hall
FINEX '08
NO MINE EXISTS WITHOUT THE PROCESS
OF EXPLORATION & DEVELOPMENT (E&D)
E&D IS THE LIFEBLOOD OF THE MINING
INDUSTRY & CURRENTLY NEW BLOOD IN
SHORT SUPPLY
FINEX '08
Drilling Dominican Republic
5000 metres a.s.l. Peru
Engaging natives in Kenya
Drilling in Turkey
FINEX '08
THE EXPLORATION-MINING VALUE CURVE
VALUE
The E & D
Business


The Mining
Business
POSITIVE
FEASIBILITY
GREATEST
VALUE
ADDED
THROUGH
E&D
LONG TERM VALUE ADDED
FINANCING &
CONSTRUCTION
START-UP
PROBLEMS
TIME
Discovery
“Excitement”
Development
“Investment Analysis”
Production
“Real Results”
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Risk = Probability of Success By Financial Exposure
1. First phase drill program
2. Second phase after
initial encouragement
1
2
High
REWARD
3
4
Low
Project
3. Pre-Feasibility
Stage
Low
4. Feasibility Stage
High
RISK
RISK REWARD DIAGRAM
FINEX '08
HOW MANAGE AND INCREASE PROBABILITY OF SUCCESS.
1. QUALITY OF PEOPLE.
Good people are rare because all competitors don’t have them.
They are valuable because they affect the bottom line.
They are inimitable because they cannot be copied or substituted.
2. QUALITY OF TECHNICAL TEAM.
Teams can ensure that different viewpoints and perspectives are taken
into account early on, thus make better decisions.
3. LEADERSHIP.
Leadership is different to management.
4. RISK MANAGEMENT.
The evaluation and controlling of risks that face exploration companies
will ensure that opportunities are not missed, and competitive
advantage is enhanced
FINEX '08
THE RESOURCE SECTOR IS CURRENTLY BOOMING AND
EXPERIENCING EXCELLENT FINANCIAL PERFORMANCES
MINING COMPANIES MUST REPLACE THEIR PRODUCTION TO
SUSTAIN THEMSELVES
YET WE ARE SEEING A DECLINING DISCOVERY RATE IN E&D
E&D MORE IMPORTANT THAN EVER
FINEX '08
THE DRUG DEVELOPMENT PROCESS: WHAT HAPPENS and WHEN
Early Research/
preclinical testing
YEARS
6.5
FDA Review Process
Phase
Phase
Phase
I
II
III
1.5
2
3.5
Approval
On Market
Phase
IV
1.5
15 years
to get here
Test
Test tube and
20-80
100-300
1000-
Population
animal studies
healthy
patients
3000
volunteers
Purpose
Patients
patients
Look for
Determine
Evaluate
Confirm
Post
safety,
safety and
effectiveness effectiveness
desired activity
dosage for
look for
Look for side effects
next phase
potential
from long term use
toxic side effects
marketing
surveillance
of the patients
to look for
potential problems
SUCCESS
5000
5
1
RATE
evaluated
compounds enter clinical trials
compound approved
Source: Pharmaceutical Research & Manufacturing Association
FINEX '08
Research & Development
=
The R&D Process
The E&D Process
Long-Range Research
General scientific/technology research
unrelated to any specific product
Grass-roots exploration
General exploration of country or region;
target generation exploration
Advanced Product Engineering
Research and development focusing
on product lines
Advanced Exploration
Exploration and discovery focusing on
quality economic orebodies incorporating
geology, mine engineering, metallurgy and
economics focusing on the product
Product Engineering
Mine Engineering, Mineral processing
and Geological Modelling
Preparing the product – reserves for
mining and the market
Adapting the product concepts for
use in products
Exploration & Development
FINEX '08
TODAY
VISION FOR THE FUTURE
Commercial mining makes the difference
between success and failure of a mining
company.
Mining companies can focus on their
priorities for success.
E&D is an expensive, risky process that
cannot be relied upon to support the mining
companies portfolio.
Mining and E&D have traditionally struggled
to work together in mining companies due to
clashes in culture, objectives and priorities.
The ‘not found here’ mentality may result in
exploration groups within a mining company
encouraging internal projects over external
projects.
Mining companies are free to select the right
projects for their portfolio, from the right
E&D group, at the right time.
Mining companies maintain links with
development.
Exploration risk is spread across a number of
focused E&D groups.
A clearly defined ‘business’ relationship is
defined between commercial mining and
E&D.
E&D is free to sell innovations to the ‘best’
customer.
The Relationship of Mining and E&D
FINEX '08
Mining companies will need to balance risk in their
portfolios by sourcing multiple projects from multiple
E&D partners to ensure their ability to select the best
projects at the right time. In order to establish this new
paradigm, commercial mining will form clearly defined
“business” relationships with E&D organizations providing
a framework to manage their inherent differences.
The mining companies of the future will have to make
better decisions endowing it the ability to select the best
projects sooner and hence reduce late stage costly
attrition. Deals that are often struck too late in a project
development are unlikely to generate maximum value for
the mining company.
FINEX '08
THANK YOU
FINEX '08