Exploration, risk and the value of geophysics

Abstract

Developments in the application of statistical signal processing techniques to mineral exploration have shown that, in addition to providing a ranked set of targets, it is possible to make useful statements about the probability of successfully detecting a target and the probability of producing a false alarm. These probabilities can then be use to assist and assess exploration decision-making. This paper outlines a method to analyse the cost-effectiveness of a given geophysical technique as part of an exploration programme and demonstrate the increase in NPV that geophysics can provide. I consider a simple model for the exploration process. The model accepts the probabilities produced from the target selection process and uses them with simple, generalised prospectivity information and exploration financial constraints to estimate the probability of exploration success. Then, using standard methods from financial analysis, this scheme has been generalised to a more complete study of the profitability of the exploration process. Thus, instead of modelling a single exploration scenario, we can model in a way that accommodates wide ranges of possible inputs and NPV outcomes. Like most financial analysis, this type of analysis can?t be rigorous in the same way we think of geophysical data analysis. However, it is an objective way of examining and justifying exploration expenditure that meshes well with many other types of financial analyses that are used to make decisions in most other aspects of the mining industry. In that sense it provides exploration management a quantitative way of evaluating exploration options and justifying exploration expenditure.