resources versus reserves - sykes & trench - aug 2014 - centre for exploration targeting /...

Systemic

Thinking

RESOURCES vs RESERVES:

Towards a Systems-based

understanding of Exploration and

Mine Project Development and

the Role of the Mining Geologist

John P. Sykes MAusIMM

PhD Candidate / Adjunct Research Fellow

Centre for Exploration Targeting

Curtin University / The University of Western Australia

Email: [email protected]

Allan Trench FAusIMM

Professor, Progressive Risk & Value

Centre for Exploration Targeting

Curtin University / The University of Western Australia

Email: [email protected]

AusIMM 9th International Mining Geology Conference, 18-20th August 2014, Adelaide, Australia

mailto:[email protected]

mailto:[email protected]

Resources vs Reserves: Towards a Systems-based Understanding of Exploration and Mine Project Development and the Role of the Mining Geologist

The problem: Breaking the exploration-

mining feedback loop

19 August 2014 AusIMM Ninth International Mining Geology Conference, Adelaide, Australia

What are

you looking

for?

What do you

want me to

find?

?

MINE

BUSH

?

Slide 2 of 23


Linking exploration & development

• McCuaig et al. 2000 concerned about communication of geology to

other professions during project development:

– Encouraged use of ‘risk’ as a language

– Geologists need to be better communicators & have wider knowledge

• Now concerned about the flow of information in the opposite way

from mining to geology/exploration to aid targeting:

– Recommendations however remain the same

– But hopefully also some additional, new ideas

19 August 2014 AusIMM Ninth International Mining Geology Conference, Adelaide, Australia Slide 3 of 23


Exploration will have to consider

economics from the beginning


Based on: CRIRSCO (2013); Sykes & Trench 2014

RESOURCES

RESERVES

GEOLOGICAL CERTAINTY

EC

ON

OO

MIC

FE

AS

IBIL

ITY

‘McKelvey” Reserve Box Theoretical Reserve Box

RESOURCES


EC

ON

OO

MIC

FE

AS

IBIL

ITY

RESERVES RESERVES

Slide 4 of 23


What does economic mean nowadays?

Technical vs Political Risk?

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Weda Bay,Indonesia

Dumont,Canada

(QC)

Kalgoorlie(Heron),Australia

(WA)

Zebediela,SouthAfrica

Jacaré,Brazil

Gag Island,Indonesia

MountMargaret,Australia

(WA)

Maturi,USA (MN)

Turnagain,Canada

(BC)

Sulawesi,Indonesia

Nic

ke

l G

rad

e (

%)

Co

nta

ine

d N

ick

el (M

t)

Size, Grade & Political Risk for Top 10 Largest Nickel Projects


1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Data: Schodde; Fraser Institute

Slide 5 of 23


Increasing environmental & social

problems at mine projects


2003

55

190 245

Active (Advancing)

Stalled due to socio-political & environmental reasons

Stalled due to "lack of progress" or economic reasons

Data: Schodde; Fraser Institute

“…the primary

factors that govern

whether a given

project is developed

will be social,

economic, and

environmental in

nature.” - Mudd, Weng & Jowitt, 2013

Slide 6 of 23


System dynamics: economies of

scale vs environmental footprint


Greater Project

Risk

Needs Increased

Scale to be

Economic

Increasing Social

& Environmental

Footprint

A large, low grade

deposit in a

developing country

without an

established mining

culture…

Trench et al. 2014

Slide 7 of 23


Actually… Quantity vs Quality

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Pebble,USA (AK)

Resolution,USA (AZ)

Udokan,Russia

Oyu Tolgoi,Mongolia

Kamoa,D.R. Congo

CobrePanamá

La Granja,Peru

LosSulfatos,

Chile

El Pachon,Argentina

Tampakan,Philippines

Co

pp

er

Gra

de (

%)

Co

nta

ine

d C

op

per

(Mt)

Size, Grade & Political Risk for Top 10 Largest Copper Projects


1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Slide 8 of 23


But we’ve always known this!


“Now a miner, before he begins to mine the veins must consider seven things, namely:- the situation, the conditions, the water, the roads,

the climate, the right of ownership and the neighbours.”

- Agricola, 1556

Image: Wikipedia

Slide 9 of 23


What’s different nowadays?


“Development that

meets the needs of the

present without

compromising the

ability of future

generations to meet

their own needs.”

- Brundtland Commission, 1987

“Social” “Equitable”

“Viable”

Sustainable

“Bearable”

Based on: Elkington (1999); Eggert (2013)

Slide 10 of 23


Moving from hierarchies to systems

in mining incorporating accessibility


Source: CRIRSCO (2013); Sykes & Trench (2014)

RESOURCES

RESERVES


EC

ON

OO

MIC

FE

AS

IBIL

ITY


EC

ON

OO

MIC

FE

AS

IBIL

ITY

RESERVES

RESOURCES

Slide 11 of 23


UNDISCOVERED

UNECONOMIC but

ACCESSIBLE

RESOURCES

DISCOVERED ECONOMIC

but INACCESSIBLE

UNDISCOVERED

INACCESSIBLE but

ECONOMIC

DISCOVERED

ACCESSIBLE but

UNECONOMIC

UNDISCOVERED

UNECONOMIC but

ACCESSIBLE


EC

ON

OM

IC F

EA

SIB

ILIT

Y

DISCOVERED

ACCESSIBLE

and ECONOMIC

(Behind)

DISCOVERED but

INACCESSIBLE

UNECONOMIC UNDISCOVERED

INACCESSIBLE

and

UNECONOMIC

UNDISCOVERED

but ACCESSIBLE

ECONOMIC

Mineral exploration needs to focus on

undiscovered, accessible reserves


Source: Sykes & Trench (2014)

Slide 12 of 23


But, how do we measure accessibility? 1. Establish which non-technical factors

influence mine projects

2. Count the frequency with which these

non-technical factors affect mine projects

3. Calculate how these non-technical

factors constrain the economic evaluation

model inputs

4. Use ‘system dynamics’ to determine

how the ‘factors’ link together


“Nobody made a greater

mistake than he who did

nothing because he could only do

a little.”

- Sydney Smith, 1849

“It is better to be vaguely

right, than exactly wrong.”

- Carveth Read, 1898

Slide 13 of 23


A truly systemic approach will

require a understanding of the future


Source: Schodde (2014)

What will

copper mines

look like in

2030-50?

Slide 14 of 23


Paradigmatic change is rapid and

complex


Data estimated

from: Crowson,

2012

20th century copper

mining technology,

innovation &

discovery package

Dynamite

Steam power

The corporation

Mechanisation

Major public

infrastructure

Flotation

Improved

smelting &

refining

Airborne

geophysics

Porphyry

geological

model

Better work

practices

SXEW

Computation

Low cost

drilling

Globalisation

Sources: Schodde, 2010;

Lynch, 2002 & various

personal communications

to the author

0%

10%

20%30%

40%50%

60%70%

80%

90%

100%

Sh

are

of

Glo

bal C

u M

ine p

rod

ucti

on

United Kingdom Chile USA Other

…in 1898.. Bingham Canyon… was something of a joke… only barren quartz rock flecked with a trace of copper. Nobody could

make money out of so little. …the world’s most famous mining man [Chief Engineer for the Guggenheims] turned up his nose. It

was ridiculed by the most respected mining journal of the day. …The shovels started… in June 1906. (Lynch, 2002)

Slide 15 of 23


In a multi-disciplinary environment

communication is critical


Exploration

Geologist

Mining

Geologist

Language of

“geology”

Mining

Engineer

Metallurgist

Management

Non-technical

Professionals

Language of “mining”

(optimisation focused

risk & value)

Language of “exploration”

(probability focused risk &

value)

Information flows considered in this paper

Information flows considered by McCuaig et al. (2000), Stephenson & Vann (1998) and Stephenson (1990)

Information flows not considered by any of these papers

Slide 16 of 23


Knowledge empathy is critical for

effective communication


Focused

Knowledge

Inter-disciplinary

Knowledge

Broad

Knowledge

Systemic

Thinking

1. A lack of interest in, or knowledge of the full

mining process by geologists.

2. As a result of this, geologists generally do not

focus their inputs towards… issues critical for

other members of the mining team.

3. [Thus] Few geologists effectively communicate

their results… The results are that the…

appropriate status of geology in the mining

industry, [is] not fully realised.

- McCuaig et al., 2000

Slide 17 of 23


Mining geologists will have to become

broad & interconnected thinkers


Focused Knowledge: discussions within the

profession that build a deeper understanding

of the subject.

Inter-disciplinary Knowledge: discussions

between different relevant professions within

an organisation or project.

Broad Knowledge: knowledge of and

discussions with different industries and other

academic disciplines, which may help your

own profession. i.e. petroleum industry,

pharmaceutical industry, organisational

theory, sustainable development, space

exploration.

Systemic Knowledge: various thinking

techniques that help connect the other types

of knowledge (‘focused’, ‘inter-disciplinary’

and ‘broad’) together. i.e. soft & hard systems

theory, scenario planning, lateral thinking &

problemitisation.

NB: there is more knowledge outside of a field, than there is within it.

Slide 18 of 23


However such ‘motherhood’ ideas

are difficult to implement in reality



Changes may be required to personal

development for mining geologists • How do mining geologists gain inter-disciplinary, broad & systemic knowledge?

– In-house training programmes for the majors

– Can the AusIMM help everyone else?

• Well positioned for inter-disciplinary knowledge development – Rotations through different teams at the majors

– Two streams (Advanced & Inter-disciplinary) on conference courses & fieldtrips

– Co-authoring of papers between multiple disciplines

– Inter-disciplinary themes at conferences or inter-disciplinary conferences

• How do we develop broad and systemic knowledge? – Again, in-house training programmes for the majors

– Joint conferences and fieldtrips – petroleum, sustainability, ecology, arts, NASA?

– Specific broad acknowledge acquisition unit/event?

• Needs to align with KPI’s, funding & CP program



Conclusions • Effective exploration requires mining professionals to communicate the

parameters of an economic mine back to exploration professionals

– A common language is therefore required for mining professionals – economic risk

and value is suggested

– Mining geologists will be a critical link between mining and exploration

• The parameters of an economic or ‘world class’ mine however appear to have

changed by sustainable development

– Mining geologists will therefore have to be conversant in a wide range of disciplines

(including many ‘unrelated’ to mining to help break paradigmatic thinking)

• Such ‘motherhood’ solutions are frequently suggested at conferences.

Implementation of them is another matter.

– The industry will have to help mining geologists both acquire and use such knowledge



Thank you


Systemic

Thinking

Slide 22 of 23


Further reading • Sykes, J.P. 2014. Finding the copper mine of tomorrow: Exploration targeting for copper reserves, not

resources. AusIMM New Leaders Conference. Perth, Australia. August. [ABSTRACT]

• Sykes, J.P., & Trench, A., 2014. Resources versus Reserves: Towards a systems-based

understanding of exploration and mine project development and the role of the mining geologist.

AusIMM Ninth International Mining Geology Conference. Adelaide, Australia. August.

• Sykes, J.P., & Trench, A., 2014. Finding the copper mine of the 21st century: Conceptual exploration

targeting for hypothetical reserves. Society of Economic Geologists Conference. Colorado, USA.

October.

• Trench, A., Packey, D., & Sykes, J.P., 2014. Non-technical risks and their impact on mining. AusIMM

Monograph 30 on Mineral Resource & Ore Reserve Estimation. Chapter 7: Risk in Resource and

Reserve Estimation.


resources versus reserves - sykes & trench - aug 2014 - centre for exploration targeting /...

Science

house training

mine project

western australia

copper mine

grade amp

mining geologist

mining geologists

based understanding