The return from exploration success: Relating economic quality to geological quality

This thesis examines the relationship between economic quality and underlying geological quality of mineral deposits. Geological quality is a function of deposit grade, deposit size and “other” geological factors. Mineral deposits of the same deposit type have similar geological quality attributes. Economic quality is measured relative to a benchmark. The relevant benchmark in this study is differential rent as measured by net present value. The higher the net present value the higher the quality of the deposit. The hypothesis is advanced that the risks associated with exploration can be reduced by examining economic and geological quality characteristics of specific deposit types.; Discovery risk is the probability of an economic deposit, given a technical success. Empirical research is conducted on a database of more than 1,500 deposits for the analysis of discovery risk. Findings show that discovery risk has a stronger correlation with high size thresholds than high profitability thresholds.; On a commodity basis, zinc deposits have the lowest discovery risk followed by copper deposits, and then gold deposits which have the highest discovery risk. As corporate cut-off changes from breakeven conditions to net present value equal to {dollar}1 billion, discovery risk increases substantially as fewer deposits meet the minimum economic requirements.; World class deposits require large tonnage, high grade and a favorable set of other geological characteristics relative to other deposits of the same deposit type.; In conclusion, discovery risk is best managed by understanding the relative magnitude and variability of discovery risk on a deposit type basis.; Analysis of geological quality and its relationship to economic return shows that geological grade, other geological features and to a lesser extent tonnage are characterized by the deposit type to which they belong. While tonnage and grade are necessary for a technical success, it is the other geological factors which economic quality and exploration success ultimately depends. These can best be understood both economically and geologically from deposit type analysis.; Deposit type analysis of the magnitude and variability of the underlying geological quality (measured by discovery risk and geological risk) which results in economic quality provides valuable guidelines in planning for exploration success. (Abstract shortened by UMI.)...