Editorial The value of exploration

But consider this statistic. When 70 possible economic mineral deposits discovered in Ontario since the Second World War were studied, it was found that an $80-million expected value at the start of exploration jumped to an average of $177 million appraised at the start of mine development.

In other words, the $97-million difference is a rough measure of the value exploration added to those deposits.

That was only one of many interesting findings of a study, prepared by the Centre for Resource Studies for the Ontario government, entitled Mineral Exploration and Mine Development Potential in Ontario: Economic Guidelines for Government Policy. Some other highlights include these findings:

— The average base metal deposit is three times more costly to find, but tends to be five times larger and more profitable than the average gold deposit.

— The impact of taxation in Ontario on the incentive for investment in mineral exploration and mine development is substantial. For example, in a base case constructed from a study of 70 deposits, the expected value o f exploration per economic discovery is reduced from $80 million to $45 million on an after- tax basis.

— The “elephants” in Ontario — the Kidd Creek and Hemlo discoveries — are what make the province a target for mineral exploration with high prospects. Without them, Ontario would be “a marginal environment on average.”

— The average up-front activity required to find and delineate an economic deposit in Ontario cost $37 million and took six years.

Perhaps the most disturbing finding in the study is the marked deterioration in the potential value of base metal exploration during the past 20 years. That is something that most people in the industry have intuitively been aware of for some time, but this study begins to examine the phenomenon in detail. Unfortunately, the only recommendation in this area is that further examination should be undertaken.

The study was designed to form a basis for mineral policy formulation in Ontario and as such it is a worthwhile step. If this kind of information can convince policy-makers of the significance of mineral discoveries in the province and the importance that mineral exploration plays in that process, the study will have been put to good use.

]]>