R Schodde PACRIM Conf March 2015 FINAL

Discovery Performance for Gold
and Base Metals in the

Pacific/South-East Asia
Richard Schodde
Managing Director, MinEx Consulting
Adjunct Professor, University of Western Australia
PACRIM 2015
19th March 2014, Hong Kong
MinEx Consulting Strategic advice on mineral economics & exploration

Overview
1. Trends in exploration spend Pac/SEA’s share of global expenditures
2. Number of discoveries ... and how much metal was found?
3. Location of the discoveries … and which countries are well-endowed?
4. Unit cost of discoveries US$/oz of gold and $/lb of Cu, Ni and Zn, and
how does Pac/SEA compared to other regions?
5. Quality of the discoveries How many Tier 1, 2 & 3 deposits found?
6. Value Proposition for exploration Does exploration make money?

Which Regions gave the best return?
7. Business Risk issues Can we use the Fraser Institute’s scores of

Mineral and Policy Potential to predict the
overall level of exploration spend?
8. Conclusions
MinEx Consulting Strategic advice on mineral economics & exploration 2

Exploration expenditures reached an all-time high in 2012
1. TRENDS IN EXPLORATION SPEND

Exploration expenditures: World
by Region : 1975-2014
Expenditures
have halved in
Spend reached the last 3 years
an all-time
2014 US$ Billion high in 2012
$35 $30.7B
in 2012
$30 Typically have a Australia
40-60% fall between
Canada
$25 boom and bust
USA
$15.6B
$20 in 2014 Western Europe
1981 1988 1997 Rest of World
$15
Africa
$10 Latin America
1985 1993 2002
FSU + E Europe
$5
China
$0 Pacific / SE Asia
1975 1980 1985 1990 1995 2000 2005 2010
Note: Includes bulk minerals (such as iron ore, coal and bauxite) Sources: MinEx Consulting estimates © March 2015, based on
data from ABS, NRCan, MLR (China), OECD and SNL

Exploration expenditures: World
by Region : 1975-2014
Aust/Can/USA’s market share has
halved in the last 2 decades
Percentage of total spend
100%
11% Australia
13% Canada
80%
6% USA
3%
2% Western Europe
60% 14%
Rest of World
Africa
40% 21% Latin America
7% FSU + E Europe
20% China
China 19%
Pacific / SE Asia
10%
0%
Pac/SEA 5%
1975 1980 1985 1990 1995 2000 2005 2010 China spends more
on exploration than
Pac/SE Asia share has also any other country in
halved in the last 2 decades the World
Note: Includes bulk minerals (such as iron ore, coal and bauxite) Sources: MinEx Consulting estimates © March 2015, based on
data from ABS, NRCan, MLR (China), OECD and SNL

Exploration expenditures: Pacific/SE Asia
1975-2014
Expenditures have
dropped by 60% in
2014 US$ Billion the last 2 years
$2.0 $1.76B
in 2012
$1.5
$1.0 $0.71B
in 2014
$0.5
$0.0
1975 1980 1985 1990 1995 2000 2005 2010
Source: MinEx Consulting estimates © March 2015,

based in-part on data from SNL-MEG

by Commodity : 1975-2014
2014 US$ Billion

$2.0
Most of the exploration spend

$1.5 in Pacific / SE Asia is on gold
Other
and base metals
Coal
$1.0 Iron Ore

Diamonds
Uranium
$0.5 Base Metals
Gold
$0.0
1975 1980 1985 1990 1995 2000 2005 2010


Very little spent in Pac/SEA
exploring for iron ore,
Percentage of total spend diamonds and uranium
100% 6% Other
Other
(includes bauxite) Coal 16% Coal
80% 2% Iron Ore
0% Diamonds
0% Uranium
Base Metals
60% (Cu, Ni, Zn, Pb) 26% Base Metals
40%
50% Gold
20% Gold Gold continues

to be the main
0%
target
1975 1980 1985 1990 1995 2000 2005 2010


Exploration expenditures: WORLD
WORLD spend shows
a different pattern
Percentage of total spend
100%
Other 14% Other
80% 12% Coal

Diamonds
Iron Ore 13% Iron Ore
3% Diamonds
60% Uranium 3% Uranium
Base Metals
(Cu, Ni, Zn, Pb)
25% Base Metals
40%
20% 30% Gold

Gold
0%
1975 1980 1985 1990 1995 2000 2005 2010


Number of discoveries in Pac/SEA – by commodity and size
2. NUMBER OF DISCOVERIES &

AMOUNT OF METAL FOUND

Number of discoveries by commodity
Mineral discoveries in Pacific/SE Asia: 1975-2014
Zinc/Lead 2
Number Most of the deposits Nickel 17
15 found were gold Copper 43
and copper
Gold 101
163
10
5
Caution:
Incomplete data
in recent years
0
1975 1985 1995 2005 2015
Note: Based on Moderate-, Major- and Giant-sized deposits Source: MinEx Consulting © March 2015
Excludes satellite deposits in existing camps

Number of discoveries by size
Gold and Base Metal discoveries in Pacific/SE Asia: 1975-2014
Number
On average, 3-6 Moderate 66
15
significant discoveries Major 69
are made each year Giant 28
163
10
5
Caution:
Incomplete data
in recent years
0
1975 1985 1995 2005 2015
Note: “Moderate” >100koz Au, >10kt Ni, >100Kt Cu equiv, 250kt Zn+Pb
“Major” >1Moz Au, >100kt Ni, >1Mt Cu equiv, 2.5Mt Zn+Pb
“Giant” >6Moz Au, >1Mt Ni, >5Mt Cu equiv, 12Mt Zn+Pb Source: MinEx Consulting © March 2015

Gold Ounces found
Primary gold deposits found in Pacific/SE Asia : 1975-2014
Moz Au-eq
100
Most of the giant gold deposits
80 Macraes (9 Moz) in Pacific/SE Asia were found
in the early 1980s
Lihir (73 Moz)
60
Hishikari
40 (11 Moz)
Far South East
(38 Moz) Porgera (32 Moz)
20
Estimate
0
1975 1985 1995 2005
Kelian (7 Moz) Hidden Valley (8 Moz) Martabe (8 Moz)
Simberi (7 Moz) Chatree (6 Moz)
Wafi Gold (7 Moz) Gosowong Camp (6 Moz)
Diwawal (15 Moz)
Source: MinEx Consulting © March 2015
Note: By-product credits are based on average commodity prices
prevailing between Jan 2012 and Dec 2014

Copper metal found
Primary copper deposits found in Pacific/SE Asia : 1975-2014
Mt Cu-eq
100
80 Several giant copper

deposits have been found
60 in recent years
40
20 Namosi
(9 Mt) Elang
(8 Mt) Estimate
0
1975 1985 1995 2005
Tampakan (19 Mt) Oyu Tolgoi (42 Mt) Golpu (13 Mt)
Batu Hijau (11 Mt) Tujuh Bukitk (14 Mt)
Grasberg (88 Mt)
Note: By-product credits are based on average commodity prices Source: MinEx Consulting © March 2015

Where were the discoveries made?
3. LOCATION OF DISCOVERIES

Significant gold and base metal deposits in East Asia
ALL YEARS
Pac/SE Asia
N= 374
China
N = 403
Far East Russia

N = 187
Au
50 Moz
10 Moz
1 Moz
0.1 Moz
Cu Ni Zn+Pb
50 Mt
10 Mt
1 Mt
0.1 Mt

Total contained metal per km2 : by country in Pac/SEA
Oz Au t Cu t Ni t Zn+Pb Oz Au t Cu t Ni t Zn+Pb
WORLD 88 26 2.3 10.6 Myanmar 2 12 1.9 12.2
China 38 11 0.9 5.6 New Caledonia - - 1118.8 -
Far East Russia 63 5 0.6 5.5 New Zealand 122 - - -
Pac/SE Asia 127 16 3.5 5.7 North Korea 141 27 - 202.6
Cambodia 7 - - - Philippines 606 189 49.8 0.2
Fiji 1173 426 - - PNG 542 110 16.8 0.1
Indonesia 161 43 17.3 2.6 Solomon Islands 102 - 66.8 -
Japan 79 9 - 9.3 South Korea 12 - - -
Laos 43 19 - - Taiwan 193 8 - -
Malaysia 33 15 - 3.0 Thailand 13 4 - 3.4
Mongolia 37 38 - 0.2 Vietnam 22 3 0.5 -
Source: MinEx Consulting © January 2015

Total contained metal per km2 : by country in Pac/SEA
Some of the Pac/SEA countries are very well endowed for gold and base metals Room to improve ?
Oz Au t Cu t Ni t Zn+Pb Oz Au t Cu t Ni t Zn+Pb
WORLD 88 26 2.3 10.6 Myanmar 2 12 1.9 12.2
China 38 11 0.9 5.6 New Caledonia - - 1118.8 -
Far East Russia 63 5 0.6 5.5 New Zealand 122 - - -
Pac/SE Asia 127 16 3.5 5.7 North Korea 141 27 - 202.6
Cambodia 7 - - - Philippines 606 189 49.8 0.2
Fiji 1173 426 - - PNG 542 110 16.8 0.1
Indonesia 161 43 17.3 2.6 Solomon Islands 102 - 66.8 -
Japan 79 9 - 9.3 South Korea 12 - - -
Laos 43 19 - - Taiwan 193 8 - -
Malaysia 33 15 - 3.0 Thailand 13 4 - 3.4
Mongolia 37 38 - 0.2 Vietnam 22 3 0.5 -
Relative to WORLD <0.2x 0.2-0.5x 0.5-2x 2-5x 6-10x >10x Source: MinEx Consulting © January 2015

Significant gold and base metal deposits in East Asia
Discovered 2005-2014
Pac/SE Asia Kekura Centre Sovinoye
Kultuminskaya
N= 20 [Au:2007]
[Au:2005] [Au:2005]
Lugokanskaya
China [Au:2006]
N = 27
Malmyzh
Far East Russia [Cu/Au:2007]
Poyi
N = 18 [Ni:2009]
Beiya Au
50 Moz
[Au:2005] 10 Moz
1 Moz
Zhaxikang 0.1 Moz
[Zn:2010]
Cu Ni Zn+Pb
50 Mt
10 Mt
1 Mt
0.1 Mt
Golpu
[Cu/Au:2009]
Tujuh Bukit
[Cu/Au:2007]

How much does it cost to find gold and copper in PAC/SEA?
4. UNIT COST OF DISCOVERIES

Gold Ounces found
Primary gold deposits found in Pacific/SE Asia : 1975-2014
Moz Au-eq
100
80
60
40
20
Estimate
0
1975 1985 1995 2005

Note: By-product credits are based on average commodity prices

Gold exploration expenditures and ounces found
Primary gold deposits found in Pacific/SE Asia: 1975-2014
Moz Au-eq Expenditures (2014 US$ M)

100 Exploration $ $1,000
Estimated Unreported
80 By-product Credits (Au-eq) $800
Primary Gold Discovered
60 $600
40 $400
20 $200
Estimate
0 $0
1975 1985 1995 2005

Unit discovery costs for gold have doubled each decade
Primary gold found in Pacific/SE Asia and World: 1975-2014
2014 US$/oz
Pacific / SE Asia
$250
1975-1984 1985-1994 1995-2004
Whtd Avg = $2/oz Whtd Avg = $25/oz Whtd Avg = $51/oz
Whtd Avg = $9/oz Whtd Avg = $18/oz Whtd Avg = $25/oz
$200
2005-2014
Whtd Avg = $199/oz
$150
World
$100
$50
2005-2014
Whtd Avg = $50/oz
$0
1975 1985 1995 2005 2015

Note: Three-Year Rolling Average. Includes by-product credits
and adjusted for unreported discoveries in recent years

Copper metal found
Primary copper deposits found in Pacific/SE Asia : 1975-2014
Mt Cu-eq
100
80
60
40
20 Estimate
0
1975 1985 1995 2005

Copper exploration expenditures and metal found
Primary copper deposits found in Pacific/SE Asia: 1975-2014
Mt Cu-eq Expenditures (2014 US$ M)

100 Exploration $ In spite of heavy $1,000
Estimated Unreported spending, no new
By-product Credits (Cu-eq) deposits have been
80 $800
Primary Copper Discovered reported since 2010
60 $600
40 $400
20 Estimate $200
0 $0
1975 1985 1995 2005

Until recently, unit discovery costs for copper
have not increased in real terms over time
Primary copper found in Pacific/SE Asia and World: 1975-2014
2014 US c/lb Cu-eq
10 1975-1984 1985-1994 1995-2004 2005-2014
Whtd Avg = 2.1 c/lb Whtd Avg = 0.2 c/lb Whtd Avg = 0.6 c/lb Whtd Avg = 3.6 c/lb
Whtd Avg = 1.2 c/lb Whtd Avg = 0.5 c/lb Whtd Avg = 0.8 c/lb Whtd Avg = 4.0 c/lb
8
6
Pacific / SE Asia
2 World
0
1975 1985 1995 2005 2015

Note: Three-Year Rolling Average. Includes by-product credits
and adjusted for unreported discoveries in recent years

Unit discovery costs for gold and copper
By Region 2005-2014
2014 US $/oz
$200 GOLD $199
$150
$101
$100 $81 $71 $71 $65 $57
$47 $42 $50
$50 $31
$0
2014 US c/lb
91
40 35.5
COPPER
30 25.9
20
10 4.7 3.0 2.8 3.6 4.9 3.9 4.0
2.3
0
Note: Includes by-product credits and adjusted for unreported discoveries in recent years Source: MinEx Consulting © March 2015

Unit discovery costs for nickel and zinc/lead
By Region 2005-2014
2014 US c/lb
200 NICKEL
150 120.7
100 73.1
57.3
50 33.7 22.6
17.3 20.3 17.6 9.0
3.6 NA
0
2014 US c/lb
40.4
30 ZINC/LEAD
20
10.9
7.3 7.6 8.7
10 5.2 3.7
NA NA NA NA
0
Note: Includes by-product credits and adjusted for unreported discoveries in recent years Source: MinEx Consulting © March 2015

How many Tier 1, 2 and 3 deposits were found in Pacific/SE Asia?
5. QUALITY OF THE DISCOVERIES

Most of the wealth created are
in Tier 1 and 2 discoveries
Estimated value of 20 discoveries found in Pacific/SE Asia between 2005-2014
Definitions
100% Unclassified
2% ‘Unclassified deposits’ are small deposits
that are less than “Major “in size and/or of
28%
Tier 3 minimal value. EV of (say) ~$10m
80% 40% Example: Tharkhek [Copper - Laos]
Unclassified
‘Tier 3 deposits’ are small / marginal deposits
While they can be profitable they often only get
60% Tier 2 developed at the top of the business cycle . At
14%
they don’t meet more than one of the Tier 1 or 2
criteria. NPV of $0 to $200m, EV of ~$100m
40% Example: Okvau [Gold - Cambodia]

Tier 3 50%
‘‘Tier 2 deposits’ are “Significant” deposits -
but are not quite as large or long life or as
20% 56% Tier 1 profitable as Tier 1 deposits . They have an
NPV of $200-1000m and EV of ~$500m
5%
Tier 2 Example: Tujuh Bukit [Copper - Indonesia]
Tier 1 5%
0%
Number of NPV ‘Tier 1 deposits’ are Company making" mines.
They are large, long life and low cost. … ie >20
Deposits Years ,>200 ktpa Cu or >250koz pa Au, and
Bottom Quartile costs. Have an NPV of
Note: Limited to deposits >=“Moderate “ in size >$1000m, and EV of ~$2000m
NPV values refer to the Net Present Value at the Decision-to-Build stage
EV = Expected Value, which is the weighted average value of the NPV range Example: Golpu [Copper - PNG]
Values are based on long run commodity prices as prevailing at Jan 2013
Caution: Values are indicative / approximate-only

Large high grade deposits get better ranks
TONNES & GRADE CHARACTERISTICS OF

GOLD AND COPPER DEPOSITS

Tonnes and Grade of Tier 1, 2 and 3 copper deposits:
World all years, open pit & underground
% Cu-eq
10.0% A Tier 1 copper deposit
needs to contain >10 Mt Cu
and have a grade >0.5-1.0% Cu
1.0%
Minimum size
threshold for
Unclassified
Tier 1 deposit
Tier 3
Tier 2
Tier 1
0.1%
1 10 100 1,000 10,000 100,000
Pre-Mined Resource ( Mt Ore)

Tonnes and Grade of Tier 1, 2 and 3 gold deposits:
World all years, open pit & underground
g/t Au-eq A Tier 1 GOLD deposit
100 needs to contain >10 Moz
and have good grades Unclassified
Tier 3
Tier 2
10 Tier 1
Minimum size
threshold for
1 Tier 1 deposit
0.1
1 10 100 1,000 10,000
Pre-Mined Resource ( Mt Ore)

Number of discoveries by quality
Tier 1, 2 & 3 Gold and Base Metal discoveries in Pacific/SE Asia: 1975-2014
Unclassified 64
The number and quality Tier 3 72

Number
of discoveries has declined Tier 2 18
15
in the last decade Tier 1 9
163
Between 1975 and 2004 , around

10 3 Tier1, 5 Tier2 and 21 Tier3
deposits were found each
decade. Discovery rates have
halved in the last decade
5
Caution:
Incomplete data
in recent years
0
1975 Hishikari 1985 1995 2005 2015
Grasberg Oyu Tolgoi Golpu
Lihir Porgera Tampakan
Diwalwal Koniamba
Note: Excludes bulk mineral and other discoveries

Does exploration create or destroy value?
How does PAC/SEA compare against regions to explore?
6. VALUE-PROPOSITION FOR
EXPLORATION

Number of discoveries by quality
Tier 1, 2 & 3 Gold and Base Metal discoveries in Pacific/SE Asia: 1975-2014
Unclassified 64
Tier 3 72
Number
Tier 2 18
15
Tier 1 9
163
10
5
Caution:
Incomplete data
in recent years
0
1975 1985 1995 2005 2015
Note: Excludes bulk mineral and other discoveries Source: MinEx Consulting © March 2015

Value of gold & base metal exploration
Estimated value of discoveries in Pacific/SE Asia: 1975-2014
Unclassified
Tier 3
2014 US$ Million
Tier 2
$3,000
Tier 1
$2,000
$1,000
$0
1975 1985 1995 2005 2015
Note: Excludes bulk mineral and other discoveries Source: MinEx Consulting © March 2015
Assumes a value (in 2013 US$) of $2000m / $500m/$100m/$10m for T1/T2/T3/Unclassifed discoveries

Cost and value of gold & base metal exploration
Exploration expenditures and estimated value of discoveries in Pac/SEA: 1975-2014
Unclassified
Tier 3
2014 US$ Million
Tier 2
$3,000
Tier 1
$2,000 Exploration
Spend Over the last decade,
US$7.4b was spent on
gold and base metal
$1,000
exploration, delivering
US$3.7b of value … ie a
“Bang per Buck” of 0.50
… the true situation is
$0
likely to be better, due to
1975 1985 1995 2005 2015
delays in reporting
discoveries
In previous decades, exploring in Pac/SEA
was a very profitable activity … not so now
Note: Excludes bulk mineral Source: MinEx Consulting © March 2015
and other discoveries

How does Pac/SEA compare to the Rest of the World?
Spend & performance by Region: 2005-2014 i.e. “Bang-
PAC/SEA was below average. Africa & Australia performed best per-Buck”
Region Exploration No of Tier 1+2 Estimated Value Value /

Spend (2014 $b) Discoveries # Discoveries (2014 $b) Spend
Australia $13 9% 100 18% 14 18% $13 14% 0.97
Canada $25 18% 79 14% 15 19% $19 21% 0.77
USA $10 7% 23 4% 5 6% $5 5% 0.48
Latin America $33 24% 109 19% 13 17% $19 20% 0.57
Pacific/SE Asia $8 5% 22 4% 2 3% $4 4% 0.49
Africa $20 14% 135 24% 20 25% $23 25% 1.19
W Europe $4 3% 23 4% 1 1% $2 2% 0.42
Rest of World $27 20% 78 14% 9 11% $8 9% 0.32
----- ------ ------ ------- ------ ------- ------- ------- -------
TOTAL $140 100% 569 100% 79 100% $93 100% 0.67
Note: Analysis includes “Other” discoveries (such as U3O8, Sn,W, PGE, Ag , REE, etc) but excludes bulk minerals
Discoveries refer to Moderate-, Major- and Giant-sized deposits.
“Rest of World” includes China, FSU and Eastern Europe Source: MinEx Consulting © March 2015
The Estimated Value is approximate only, and ignores the value of unreported discoveries

perceptions of
The level of exploration spend is influenced by changes in
Country Risk and Mineral Potential
7. COUNTRY RISK ISSUES

Factors driving exploration spend
Intuitively, companies are more likely to explore in

countries with high mineral potential and low country
risk ….
… a good way to test this is to compare the level of

exploration spend with the Fraser Institute’s Mineral
Potential Index (MPI) and Policy Perception Index (PPI)

Policy Perception Index: March 2015
122 jurisdictions around the world
100
PPI
80 PPI is a measure of how “easy” it is to do business in the Country
60
… a high score is better
40 The Pacific/SE Asian countries tend to ranked poorly
20
0
100
80
60
40
20
0
Source: Fraser Institute March 2015

Mineral Potential Index: March 2015
122 jurisdictions around the world
100 MPI is a measure of “geological potential” of the Country
MPIx100
80 … a high score is better
60 Wide range of rankings for Pacific/SE Asian countries
40
20
0
100
80
60
40
20
0
Source: Fraser Institute March 2015

Relationship between exploration spend and PPI & MPI
for 94 jurisdictions around the World in 2014
Exploration Spend (2014 US$m) Exploration Spend (2014 US$m)
$1,500 $1,500
No obvious Positive link
relationship between MPI and
between PPI and exploration spend
exploration spend
$1,000 $1,000
$500 $500
$0 $0
0 20 40 60 80 100 0 20 40 60 80 100
Policy Perception Index (PPI) Mineral Potential Index (MPI) x 100
Note: Australia and Canada are broken down by State/Province Source: MinEx Consulting © Jan 2015 based on data from the
No expenditure data available for individual US States Fraser Institute, ABS, NRCan, MLR (China) and SNL

Need to look at the “relative” trends
In addition to PPI and MPI, the absolute level of exploration
expenditures is also influenced by:
• The size of the Country, particularly the size of its mineral belts and types of
target minerals available
• The “maturity” of the mineral belts
• Cost issues – such as access to ports and power and local terrain effects
• Commodity prices and investment patterns (global spend can vary by
+/- 30% in a given year)
… Need to adjust for differences in land areas (ie focus on $/km2) and
look at relative changes in global market share over time (ie do changes
by Governments result in the country getting a bigger/smaller slice of the
total exploration pie?).

Relationship between exploration spend, MPI and PPI
for 94 jurisdictions around the World in 2014
Countries with a high Mineral Potential tend to
Mineral Potential Index (MPI) have a higher exploration spend per km2..
1.0
Philippines Chile
Queensland
PNG Western Australia
0.8
Myanmar
NT
Indonesia NSW
Mongolia China South Australia
0.6 Malaysia Tasmania
Victoria New Zealand

Vietnam
0.4
Laos Fiji Thailand
0.2
French Guiana
0.0
0 20 40 60 80 100
Policy Perception Index (PPI)
Note: The Bubble size varies with the exploration expenditures per km2 Sources: MPI & PPI scores are from the Fraser Institute’s 2014
Survey of Mining Companies. Exploration expenditures are from
ABS, NRCan, MLR (China) and SNL
MinEx Consulting Strategic advice on mineral economics & exploration

46
Relationship between intensity of exploration spend and
PPI & MPI for 94 jurisdictions around the World in 2005-2014
Intensity of Exploration Spend Intensity of Exploration Spend
1000% 1000%
100% 100%
10% 10%
0 20 40 60 80 100 0 20 40 60 80 100
Note: The Intensity of Exploration spend refers to the amount spent in the given country Source: MinEx Consulting © Jan 2015 based on data from the
(per km2) versus the World average in a given year Fraser Institute, ABS, NRCan, MLR (China) and SNL

Relationship between intensity of exploration spend and
PPI & MPI for 94 jurisdictions around the World in 2005-2014
Intensity of Exploration Spend Intensity of Exploration Spend
1000% 1000%
Philippines Philippines
PNG
PNG
China China
Indonesia
100% 100%
Indonesia
New Zealand New Zealand
Mongolia Mongolia
10% 10%
0 20 40 60 80 100 0 20 40 60 80 100
Note: The Intensity of Exploration spend refers to the amount spent in the given country Source: MinEx Consulting © Jan 2015 based on data from the
(per km2) versus the World average in a given year Fraser Institute, ABS, NRCan, MLR (China) and SNL-MEG

Statistical Results (based on Panel Analysis)
Formula … Spend per km2 = a x PPI + b x MPI + c
where a, b and c are constants ie a multidimensional
model that looks at the
Coefficient : a 1%-point increase in common trends in related
the PPI or MPI score will increase data sets over time
the amount of exploration spend by
0.17% and 0.65% respectively
Limited to those jurisdictions with >= 4 data points

P test refers to the likelihood that result is statistically
Variable Coefficient P test valid … ie PPI trend model has a 74% chance of
being incorrect, whereas the MPI model has a 22%
PPI a = 0.17 0.74 chance of invalid.
For a result to be statistically significant P <0.05
MPIx100 b = 0.65 0.22 (ie 5% chance of error)
Varying the minimum number of data points ( to >=5 and >= 10)
did not significantly improve the P test results
Source: MinEx Consulting © March 2015, with assistance from Joeri Smits
at the Center for Development and Cooperation (NADEL-ETH)

Statistical Results … effect of leaving out countries
Variable Coefficient P test

PPI a = 0.17 0.74 Leaving out Russia and China
MPIx100 b = 0.65 0.22 improved the P test score
Possible causes ….
and excluding Russia & China Issue of “granuality”… the Fraser Institute only reports a
single PPI & PPI number for each country … but these do
Variable Coefficient P test vary at the local level
PPI a = 0.29 0.54 Influence of local companies .. The Fraser Institute mainly
MPIx100 b = 0.83 0.10 surveyed Western companies. Local Russian and Chinese
explorers (who make up a big part of the local spend) have
a more positive view on risk and opportunities
Analysis suggests no reliable link
Strategic issues … level of spending may be driven by
between changes in Country Risk government and industry needs
and exploration spend
50:50 chance at best Source: MinEx Consulting © March 2015, with assistance from Joeri Smits
at the Center for Development and Cooperation (NADEL-ETH)

Statistical Results
The analysis suggests:

• That strong link between Mineral Potential and exploration
spend. Spend will rise by ~0.8% for every 1% increase in the
MPI
• Suggests that there isn’t a link between changes in Country
Risk (as measured by the PPI) and exploration spend.
Ie companies will go where the rocks are “good”, and (counter-

intuitively) will continue to explore in countries with poor policy
potential. Alternatively, the Fraser Institute data is not reliable.

9. CONCLUSIONS

Conclusions [1/4]
1. Trends in exploration spend
- Exploration is incredibly volatile. Expenditures can fall by 40-60% over
the business cycle. In the last 2 years Pac/SEA has fallen more than most
other regions
- Pac/SEA’s share of global spend has halved in the last 30 years
- Gold and Copper are the main targets in the Region
2. Number of discoveries
- On average 3-6 significant gold and base metal discoveries are made each
year in the Region (2-4 of these were gold and 1-2 copper) … however this
has dropped off in the last decade
- Most of the metal found was in a small handful of giant deposits
- The 1980s were particularly productive for gold
- The last giant gold deposit found was Martebe in 1998 (with 8 Moz) and
the last giant copper deposit was Golpu in 2009 (with 13 Mt Cu-eq)

Conclusions [2/4]
3. Location of the discoveries
- 374 significant gold and base metal deposits have been identified in the
Pacific/SE Asia. 163 of these were found since 1975 and, of these 20
were discovered in the last decade
- Over last decade 27 significant gold and base metal discoveries were
made in China and 18 in Far East Russia
- In terms of contained metal per km2, the best endowed countries are
Philippines. PNG, Fiji and (for Ni) New Caledonia
4. Unit cost of discoveries
- Unit discovery cost for gold has doubled in the last decade
- It currently costs US$199/oz to find gold in Pacific/SE Asia – versus $50/oz
for the World average
- Copper discovery costs are currently US 3.6 cents/lb Cu-eq for the Region
versus a World average of 4.0 cents/lb

Conclusions [3/4]
5. Quality of the discoveries
- Between 1975 and 2004, on average 3 Tier1, 5 Tier2 and 21 Tier3 deposits
were found each decade in the Pacific/SE Asia. Discovery rates have halved
in the last decade
- A Tier 1 gold deposit typically contains at least 10 Moz at good grades
- A Tier 1 copper deposit typically contains at least 10 Mt Cu at 0.5-1.0% Cu
6. Value proposition for exploration
- Between 1975 and 2004 exploration in Pac/SEA created a lot of value ..
With $4 of value per Dollar spent …
- But this has dropped off in the last decade with a return of only of 0.50.
This is lower than the World average of 0.67
- This is due to heavy focus on evaluating existing projects rather than
looking for new greenfield targets
- The best performing regions were Africa (1.19) and Australia (0.97).

Conclusions [4/4]
7. Country Risk Issues
- The Fraser Institute publishes annual surveys of the Policy Perception Index
and Mineral Potential Index of a wide range of countries. The Pac/SEA
countries tend to be ranked poorly on the PPI
- A statistical analysis of the data for 2005-2014 shows that the level of
exploration spend in a given country increases with Mineral Potential (ie
companies go where the “rocks are good”). A 1% increase in the MPI
increases the spend by ~0.8%.
- Surprisingly there is no strong statistical correlation between a change in
the PPI and Spend …. This is a counter-intuitive result which needs more
investigation

Contact details
Richard Schodde
Managing Director
MinEx Consulting
Melbourne, Australia
Email: Richard@MinExConsulting.com
Website: MinExConsulting.com
Copies of this and other similar

presentations can be downloaded
from my website

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Discovery Performance for Gold

and Base Metals in the

MinEx Consulting Strategic advice on mineral economics & exploration

2. Number of discoveries ... and how much metal was found?

3. Location of the discoveries … and which countries are well-endowed?

6. Value Proposition for exploration Does exploration make money?

7. Business Risk issues Can we use the Fraser Institute’s scores of

MinEx Consulting Strategic advice on mineral economics & exploration 2

1. TRENDS IN EXPLORATION SPEND

MinEx Consulting Strategic advice on mineral economics & exploration 3

MinEx Consulting Strategic advice on mineral economics & exploration 4

MinEx Consulting Strategic advice on mineral economics & exploration 5

Source: MinEx Consulting estimates © March 2015,

MinEx Consulting Strategic advice on mineral economics & exploration 6

2014 US$ Billion

Most of the exploration spend

$1.0 Iron Ore

Source: MinEx Consulting estimates © March 2015,

MinEx Consulting Strategic advice on mineral economics & exploration 7

20% Gold Gold continues

Source: MinEx Consulting estimates © March 2015,

MinEx Consulting Strategic advice on mineral economics & exploration 8

80% 12% Coal

20% 30% Gold

Source: MinEx Consulting estimates © March 2015,

MinEx Consulting Strategic advice on mineral economics & exploration 9

2. NUMBER OF DISCOVERIES &

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MinEx Consulting Strategic advice on mineral economics & exploration 11

are made each year Giant 28

MinEx Consulting Strategic advice on mineral economics & exploration 12

MinEx Consulting Strategic advice on mineral economics & exploration 13

80 Several giant copper

MinEx Consulting Strategic advice on mineral economics & exploration 14

MinEx Consulting Strategic advice on mineral economics & exploration 15

Far East Russia

Source: MinEx Consulting © March 2015

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Source: MinEx Consulting © January 2015

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MinEx Consulting Strategic advice on mineral economics & exploration 18

Zhaxikang 0.1 Moz

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4. UNIT COST OF DISCOVERIES

MinEx Consulting Strategic advice on mineral economics & exploration 20

Source: MinEx Consulting © March 2015

MinEx Consulting Strategic advice on mineral economics & exploration 21

Moz Au-eq Expenditures (2014 US$ M)

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Source: MinEx Consulting © March 2015

MinEx Consulting Strategic advice on mineral economics & exploration 23

MinEx Consulting Strategic advice on mineral economics & exploration 24

Mt Cu-eq Expenditures (2014 US$ M)

MinEx Consulting Strategic advice on mineral economics & exploration 25

Source: MinEx Consulting © March 2015

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MinEx Consulting Strategic advice on mineral economics & exploration 28

5. QUALITY OF THE DISCOVERIES

MinEx Consulting Strategic advice on mineral economics & exploration 29

40% Example: Okvau [Gold - Cambodia]

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TONNES & GRADE CHARACTERISTICS OF

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