1/x
100x lower discovery rates in #mining than #oil & gas exploration 🤯
Mining #exploration success rates: 0.3%
Vs
Oil exploration success rates: 30%
Thread on why this happens and what can be improved ⁉️
2/x
So are mineral deposits more rare than oil deposits?
Oil fields and mineral deposits are widely distributed across different continents and occur in variety of geological settings.
It's difficult to explain success rate with distribution.
3/x
Cost of drilling:
25 MUSD for 2-3km deep oil well in shallow water
vs
0.25 MUSD for 500 m deep mining drill hole
Interestingly oil well is 100x more expensive.
4/x
Oil explorers get to test a lot less geology through drill bit - the cost is simply too high.
Oil industry developed several processes 📐as well as technologies🛰️ to increase the success rate. In this post we will focus on processes as their cheap to implement in mining.
5/x
Processes leading to higher success rates in oil & gas exploration:
1. Probability of success is assessed for each prospect in a systematic fashion.
2. Only prospects with the highest success rates get tested through the drill bit.
3. 99% of ideas/leads never get tested.
6/x
4. Oil explorers do "post mortem" analysis and try to learn from dry holes.
This is in a stark contrast to mining industry where in a bull market up to 50% of portfolio gets drilled and there is no rigorous workflows for the prospect assessment pre-drill and post-dril.
7/x
Exploration geologists in oil industry are using Monte Carlo analysis on a daily basis.
This forces geologist to think in a probabilistic manner and describe geology in a form of distributions.
Mining exploration currently does not utilise probabilistic thinking. ❗️
8/x
As someone who worked across both industries (mining and oil & gas).
I see that:
1) establishing consistent workflows for prospects
2) assessing prospect probability of success
3) active portfolio management
could have big impact on exploration success rates in mining.
9/x
These are cheap methods to apply and a lot of tools are already available on the market.
Investors could benefit significantly by understanding prospect risks before investing.
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