Richard Schodde, managing director of MinEx Consulting, investigated the investments and returns on exploration dollars spent in Canada, and presented his findings at this year’s Prospectors & Developers Association of Canada convention in Toronto.
He found that over the past decade junior mining companies accounted for 71% of the “robustly economic” deposits found in Canada — widely surpassing the discovery rate by major mining companies.
While there is debate over why the majors as a group fell short of the juniors in this area, some major companies like Barrick Gold (TSX: ABX; NYSE: ABX) have proven themselves to be highly successful grassroots explorers. Since 1990, Barrick has spent US$3.3 billion on exploration, for an overall finding cost of US$25 per oz. gold — or half the average finding cost across the industry.
During this time, the company has mined 140 million oz. gold, acquired 110 million oz. gold and found a staggering 131 million oz. in gold reserves, along with discovering the multi-million ounce gold deposits at Lagunas Norte in Peru, Goldrush in Nevada and Alturas in Chile.
The Northern Miner spoke with Rob Krcmarov, Barrick’s senior vice-president of global exploration by phone to understand what drove the company towards discovery in the past, and how the company plans to keep its momentum going forward.
The Northern Miner: What challenges lay ahead for explorers, and what is Barrick’s strategy to overcome them?
Rob Krcmarov: The next generation of economic discoveries will become harder to make, because the deposits will be either partly or completely concealed. It will be important to understand the subtle signatures of a deposit, and that requires a mixture of good science, experience and intuition based on experience — otherwise it’s just gambling.
Having deep technical insights will really put you at an advantage when you’re exploring, and exploration is all about the people — so we invest heavily in the development of our geoscientists.
TNM: How does Barrick deal with its geoscientists?
RK: We invest very, very heavily in our geoscientists. We focus on their professional technical development and expose our early career explorationists to as much diversity as possible, which involves pairing them with mentors, and have them do a stint at a mine site.
Every two to three years we have a global workshop, where we get 80 of our geoscientists together to further develop our tools and share our learnings. I’ve been to several of these events, and it’s positively energizing and inspiring to see the amount of talent that’s in this organization — all talking geology together and working to make improvements in targeting criteria — and that sense of community has forged a discovery-driven culture within our company.
TNM: Is professional development for geoscientists commonly practiced in the industry?
RK: I can’t speak for other companies, but I know our workers have a strong sense of identity, take ownership and all share the same values, and it’s something that I don’t think can be easily copied by others. There are large parts of our industry that operate under the assumption that you can always pick up another geologist during the next boom, but it’s not that easy — once you lose them, that culture is gone.
Our extremely low voluntary turnover rate during the last boom is really a testament to our commitment to success — people realize they’re getting a lot of strong development opportunities at Barrick, and that feeds back into our discovery-driven culture, and is a big contributor to our success.
TNM: How does Barrick prioritize work its many exploration projects?
RK: About 10 years ago, we realized that to maximize your probability of success you need some sort of operating system, rather than randomly following perceived opportunities, or creating elaborate science experiments. So we developed the “Barrick exploration system,” which is a disciplined and transparent process that prioritizes funding. That’s been the foundation for our past exploration successes, and puts us in good stead for continued success. It’s basically our playbook, which has really evolved and improved over time.
One of the pillars of the system is to make sure we’re evaluating projects objectively, and ensuring that people don’t become emotionally involved in their targets and persevere too long. We empower our geologists to propose a project and comment on the geological criteria that distinguishes between the best deposits, so it’s not a top-down sort of thing.
We emphasize discovering economic ounces that have a chance of turning a mineral deposit into a mine. We’ll cut the projects that fail to meet expectations and accelerate those that exceed them, and it has proved successful.
TNM: What are some examples of Barrick’s exploration system succeeding?
RK: At Goldrush (a Carlin-style gold discovery near Barrick’s Cortez mine in Nevada), one of the triggers to its discovery was the detailed and excellent mapping our geologists did at the Pipeline pit. They unlocked — after many years — what the controls on mineralization were, and so they applied that model to other parts of the district, and that brought them to Goldrush.
When we started drilling we knew we were well on our way towards making a discovery, but at those early stages there’s still a lot of uncertainty. You ask yourself: ‘How large could it be? Is it continuous enough? Sufficiently high grade?’ There are more questions than answers at that point. The geologists would gather around and talk geology all night, and with more drilling the picture became clearer, the deposit footprint grew larger and our sense of excitement really grew.
Another example would be our Alturas discovery in Chile that we announced in the first quarter this year. We started by stepping back, and regimentally applied our target criteria across our entire land holdings in the El Indio belt, and that led us to Alturas.
When we sent our geologists in, everything we saw on the ground suggested that we were sitting on what looked to be a concealed epithermal deposit, so we followed up with drilling, which eventually intercepted 81.5 metres over 2.5 grams. We realized we were looking at a robust mineralizing system, similar to our Veladero mine in Argentina.
What happens in other companies — and we’ve certainly done it in the past — is that when you generate a target and drill it quite often, the initial results can be discouraging. Eventually you leave the district wondering if you even tested the best target.
In the case of Goldrush and Alturas, we had a talented team that were geologically driven to choose the best targets across the region, and that really lifted the veil off otherwise blind deposits.
There’s a common view that Barrick became great through a series of acquisitions.
There’s certainly some truth to that, but Barrick’s success is equally a product of its exploration program. By investing in exploration, creating a discovery-driven culture and attracting and developing top talent, we’ve made some amazing discoveries.