Finding the Copper Mine of Tomorrow: In search of hypothetical reserves - Sykes - March 2014 - U
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Transcript of Finding the Copper Mine of Tomorrow: In search of hypothetical reserves - Sykes - March 2014 - U
Mining & Exploration Group of Western Australia (MEGWA)
Kindly sponsored by
Presenter
John P. Sykes [1][2]*
Supervisors
Daniel Packey [1][2]
Allan Trench [1][2]
[1] Centre for Exploration Targeting, University of Western Australia
[2] Department of Mineral & Energy Economics, Curtin Graduate School of Business
FINDING THE COPPER MINE OF
THE FUTURE: In search of
hypothetical “reserves”
Image from the movie
“Avatar” courtesy of blu-
raystats.com
Mining & Exploration Group of Western Australia (MEGWA)
Okay, so it’s Wednesday night
and we’ve all started drinking…
…so lets get
philosophical!
Image: University of Melbourne (http://cdp.crida.net/2014/schedule)
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 3 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Starting with a “very smart man”*
“If I had one hour to
save the world, I would
spend 55 minutes
defining the problem
and only five minutes
finding the solution.”
- Albert Einstein†
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
* According to Steve Beresford (First Quantum Minerals / Centre for Exploration Targeting † Also with thanks to Steve Beresford for introducing me to this quote
Image: Shock Mansion (http://www.shockmansion.com/2013/03/28/video-back-to-the-future-forever-michael-j-fox-forgets-what-movie-hes-in/)
Slide 4 of 75
Mining & Exploration Group of Western Australia (MEGWA)
(Not) Aims
Therefore the aim of this presentation is:
• Not to tell you where to find the copper mine of
tomorrow
• Not to tell you how to target “reserves” rather than
“resources”
• Not to give you any answers
• Not to ask the “right” question(s)
• Just to start discussing some of the things that
might be important – a “strategic conversation”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 5 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
• Surveyed the existing
knowledge
• Came up with an
alternate hypothesis
• Tested the hypothesis
• Thought they were right
• Were actually wrong
(repeatedly)
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image: Karen Kavett (http://karenkavett.com/blog/943/making-of-guess-who-doctor-who-edition.php)
Slide 6 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Contents
• Disaggregating the current copper price “boom”
• Understanding the long-term via resource depletion
• Minerals exploration and “reserve” depletion
• Economic potential in early-stage “resources”
• Incorporating sustainable development principles
• Looking into an uncertain future…
• “Multiple hypothetical reserves”
• Conclusions
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 7 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Disaggregating the current copper price
“boom”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Sykes & Trench, 2014; Data from United States Department of Labour (2014); Historical nominal copper
prices 1914-2011 from the United States Geological Survey (2012) and 2012-13 from Metal Pages (2014)
Slide 8 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Source: Sykes & Trench, 2014; Data from United States Department of Labour (2014); Historical nominal copper
prices 1914-2011 from the United States Geological Survey (2012) and 2012-13 from Metal Pages (2014)
Record nominal and long term high real
prices
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Images: Shutterstock
Slide 9 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The supply lag and project development
problems
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Sykes & Trench, 2014; Data from International Copper Study Group (2013, 2012).
Slide 10 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The supply lag and project development
problems: The excuses list
• Underinvestment
• Falling ore grades
• Increasing depth
• Shrinking size
• Technological problems
• Underground mining
• Energy prices
• Water shortages
• Pollution
• Equipment shortages
• Raw material shortages
• Labour shortages
• Labour unrest
21 May 2014
• Operating costs
• Complicated regulations
• Environmental legislation
• Increased mine waste
• Capital cost overruns
• Project financing
• Land use conflict
• Infrastructure costs
• Political problems
• Resource nationalism
• Taxation
• Exchange rates
• Peace & security
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 11 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Declining copper ore grades
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Sykes & Trench, 2014; Data from Crowson (2012).
Slide 12 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Record exploration and substantial
“resource” growth
21 May 2014
0
5
10
15
20
25
30
35
40
45
50
0
100
200
300
400
500
600
700
800
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Copper Reserve (Mt) Depletion (yrs)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Edelstein (2004-13).
Slide 13 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Characteristics of the current copper
price “boom”
• Record nominal and long term high real prices
• The supply lag and project development problems
• Declining copper ore grades
• Record exploration and substantial “resource”
growth
• But what does this tell us about the long-term
future of the industry?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 14 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Understanding the long-term via
resource depletion: wasting assets
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
“Earth rise” from Apollo 11 Image: The Guardian/NASA
Old Geevor tin mine, Cornwall, UK,
operated late 18th century to 1990 Image: Shutterstock
Slide 15 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The “fixed stock” paradigm of resource
depletion
21 May 2014
0
5
10
15
20
25
30
35
40
45
50
0
100
200
300
400
500
600
700
800
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Copper Reserve (Mt) Depletion (yrs)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Edelstein (2004-13).
Slide 16 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The “limits” to the “fixed stock”
paradigm
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Jacks (2013)
Slide 17 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The “opportunity cost” paradigm of
resource depletion
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Jacks (2013)
Slide 18 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The future through the “opportunity
cost” paradigm: technology vs scarcity
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Jacks (2013)
No need for exploration?
Slide 19 of 75
Mining & Exploration Group of Western Australia (MEGWA)
From “fixed stock” to “sustainable
development” paradigm
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Weighted average percentage head grades of copper
mines, 1970 onwards
Source: Crowson (2012)
Slide 20 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Controlling idea: The copper industry
has a long term ‘development’ problem
“…the primary factors that govern whether a given
project is developed will be social, economic, and
environmental in nature.” - Mudd, Weng, & Jowitt, 2013
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image from the
movie “Avatar”
courtesy of blu-
raystats.com No need for exploration?
Slide 21 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Controlling idea: The copper industry
has a long term ‘development’ problem
• We understand the long-term future of the copper industry via resource
depletion: wasting assets
• The “fixed stock” paradigm of resource depletion suggests increasing
copper resource abundance
• The “limits” to the “fixed stock” paradigm: ignores innovation, technology
and discovery
• The “opportunity cost” paradigm of resource depletion suggests
increasing scarcity, but that technology & innovation can mitigate this
• The “fixed stock” paradigm has become the “sustainable development”
paradigm: the issue is not depletion of copper, but the depletion of the
environment and social-political well being
• Controlling idea: Both paradigms see the industry as development
constrained requiring technology & innovation in mining as a solution
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 22 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The exploration geologist’s view: Not all
“resources” prove to be “economic”
21 May 2014
Chart: Cairns, Hronsky, and Schodde, 2010
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 23 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The exploration geologist’s view: Not all
“resources” prove to be “economic”
21 May 2014
Chart: Cairns, Hronsky, and Schodde, 2010
“…investigate an alternative, less
capital-intensive design of the
Olympic Dam open-pit expansion…
align with the Company’s cost
control strategy in the current
economic environment…”
- BHP Billiton, 6th Dec 2012
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 24 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The exploration geologist’s view: Not all
“resources” are “sustainable”
21 May 2014
Photo: John P. Sykes
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 25 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The exploration geologist’s view: Not all
“resources” are “sustainable”
21 May 2014
Photo: John P. Sykes
“Anglo American has
given notice that it is
withdrawing from
the Pebble copper
project in Alaska.”
- Anglo American, 16th Sept 2013
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 26 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The exploration geologist’s view: Not all
“resources” are “sustainable”
21 May 2014
Photo: John P. Sykes
“Anglo American has
given notice that it is
withdrawing from
the Pebble copper
project in Alaska.”
- Anglo American, 16th Sept 2013
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
“Rio Tinto gifts
stake in Northern
Dynasty Minerals
to Alaskan
charities.”
- Rio Tinto, 7th April 2014
Slide 27 of 75
Mining & Exploration Group of Western Australia (MEGWA)
A (reserve) ‘discovery’ problem, not a
‘development’ problem
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Chart: Schodde, 2012
Slide 28 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Rising discovery costs also indicates
increased “opportunity cost”
21 May 2014
Chart: Schodde, 2012
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 29 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The “search space” concept – better
deposits found where no one has looked
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
All “search space”
Known “search space”
Corporate
“search space”
New mining
technology
New
exploration
technology
New
geographies
At depth
New
deposit
types
Changing
politics
Focus usually on
here (brownfields,
secondary
evaluation
greenfields, low
risk greenfields,
greyfields etc)
Focus should be on
here (first mover
greenfields)
Based on: Hronsky (2009)
Slide 30 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The importance of opening new “search
space”: best resources discovered first
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Chart: Hronsky & Groves, 2008
Slide 31 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The importance of opening new “search
space”: can find “better” resources
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Chart: Lagos, 2010
Slide 32 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Best deposits do not deplete after
discovery, they grow!
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Chart: Schodde, 2006
Slide 33 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Best deposits benefit from multiple
innovations and changes
21 May 2014
Chart: Schodde, 2010
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 34 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Implications of the “search space”
paradigm
• Not all “resources” prove to be “economic” or can be developed
“sustainably”
• The copper industry has a (reserve) ‘discovery’ problem, not a
‘development’ problem – evidenced by rising discovery costs (an
“opportunity cost”)
• The “search space” concept suggests better deposits found where no
one has looked – these could be developed economically and
sustainably
• To do this better conceptual exploration required:
– Targeting “reserves” from the earliest stages of exploration
– Incorporating sustainable development principles into “reserves”
– Dealing with an uncertain future – complex interactions of technology, innovation,
discoveries and external changes
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 35 of 75
Mining & Exploration Group of Western Australia (MEGWA)
From quantity to quality to “mineability”
21 May 2014
“Upper 10 percent of deposits in his database ordered in terms of contained metal. This equates to 3.2 Moz for gold, 77 Moz for silver, 2
Mt for copper, 1 Mt for lead and 1.7 Mt for zinc.” - Singer, 1995
“An informal term applied to ore deposits with an exceptionally large tonnage of economically recoverable metals”
- Laznicka, 1999 (in Schodde & Hronsky, 2006)
“Only the largest and highest grade deposits that would make a difference to the company’s bottom line.” - Tom Albanese, 2005 (in Schodde & Hronsky, 2006)
“…when economics are considered, there is no such thing as a world class mineral deposit. There are only big interesting mineral deposits
or world-class mines.” - Michael Doggett, 2004 (in Schodde & Hronsky, 2006)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 36 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Exploring for mineral reserves, not
resources
21 May 2014
PROVEN
RESERVE
PROBABLE
RESERVE
MEASURED
RESOURCE
INDICATED
RESOURCE
INFERRED
RESOURCE
Increasing level of geological knowledge and confidence
Consideration of
mining,
processing,
metallurgical,
economic,
marketing, legal,
environmental,
infrastructure,
social and
government
factors (the
“modifying
factors”)
Based on CRIRSCO, 2013
No conceptual
reserve
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 37 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Drawing from the petroleum industry
21 May 2014
PROVEN
RESERVE
(1P)
PROBABLE
RESERVE
(2P)
CONTINGENT
RESOURCE
(1C)
CONTINGENT
RESOURCE
(2C)
CONTINGENT
RESOURCE
(3C)
Range of uncertainty
Incre
asin
g c
han
ce o
f
co
mm
erc
iality
Based on SPE et al. 2013
POSSIBLE
RESERVE
(3P)
PROSPECTIVE
RESOURCE
(LOW ESTIMATE)
CONTINGENT
RESOURCE
(MED. ESTIMATE)
CONTINGENT
RESOURCE
(HIGH ESTIMATE)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 38 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Increasing level of geological knowledge and confidence
Inc
rea
sin
g c
ha
nc
e o
f
ec
on
om
ic v
iab
ilit
y
Based on (USBM & USGS 1980)
IDENTIFIED RESOURCES
Demonstrated
Inferred
Reserves
No
ec
on
om
ic
cri
teri
a a
ttach
ed
Reserves
ECONOMIC
Inferred Marginal
Reserves
Marginal Reserves
MARGINALLY
ECONOMIC
Inferred Marginal Reserves Demonstrated Sub-economic Resources
SUB-ECONOMIC
Inferred
Indicated Measured
Cumulative
Production
And from the past…
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 39 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Increasing level of geological knowledge and confidence
Inc
rea
sin
g c
ha
nc
e o
f
ec
on
om
ic v
iab
ilit
y
IDENTIFIED RESOURCES
Demonstrated
Inferred
Reserve
Base
No
ec
on
om
ic
cri
teri
a a
ttach
ed
ECONOMIC
Reserve Base
MARGINALLY
ECONOMIC
(Excluded) Inferred Marginal Reserves (Excluded) Demonstrated Sub-economic Resources
SUB-ECONOMIC
Inferred
Indicated Measured
Cumulative
Production
“Reserve Base” ~ Theoretical Reserve?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Based on (USBM & USGS 1980)
Slide 40 of 75
Mining & Exploration Group of Western Australia (MEGWA)
But we’ve always known this!
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
“Now a miner, before he begins to mine the veins must
consider seven things, namely:- the situation, the conditions,
the water, the roads, the climate, the right of ownership
and the neighbours.”
- Agricola, 1556
Image: Wikipedia
Slide 41 of 75
Mining & Exploration Group of Western Australia (MEGWA)
What’s different nowadays?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Sustainability:
“Development that meets the needs of the
present without compromising the
ability of future generations to meet
their own needs.”
- Brundtland Commission, 1987
“Social” “Equitable”
“Viable”
Sustainable
“Bearable”
Based on: Elkington (1999); Eggert (2013)
Slide 42 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Incorporating sustainable development
principles: accessiblility?
3D ‘Conceptual” Reserve Cube
Source: Cook & Sheath (1997); Otto & Cordes (2000)
RESOURCES
RESERVES
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
RESOURCES
RESERVES
GEOLOGICAL CERTAINTY
EC
ON
OO
MIC
FE
AS
IBIL
ITY
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
2D ‘McKelvey” Reserve Box
Slide 43 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Theoretical & conceptual reserves • The “search space” concept suggests better deposits found
where no one has looked – these could be developed
economically and sustainably
• To do this better conceptual exploration required:
– Targeting “reserves” from the earliest stages of exploration
• Change in focus from quantity to quality or “mineability”
• Exploring for mineral reserves, not resources
• The “possible reserve” & “reserve base” suggest the use of “theoretical
reserves for targeting
– Incorporating sustainable development principles into “reserves”
• Sustainable development is a new challenge to the industry
• Can it be thought of in terms of “accessibility”?
• “Conceptual reserves”: geological, economic and accessible
• But where do we find these?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 44 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Quiz 2: How can Scandinavian crime
noire help minerals exploration?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
? Image: Guardian (http://www.theguardian.com/media/2013/sep/17/sky-
adapts-scandinavian-drama-the-bridge)
Image: The Telegraph
(http://www.telegraph.co.uk/culture/books/bookreviews/9243399/The-Killing-
by-David-Hewson-review.html)
Slide 45 of 75
Mining & Exploration Group of Western Australia (MEGWA)
DISCOVERED RESOURCES
EM
PE
RIC
AL
EX
PL
OR
AT
ION
UNDISCOVERED RESOURCES
Reserves Inferred
Reserves
Marginal
Reserves
Inferred
Marginal
Reserves
Sub-economic
Resources
Sub-
economic
Reserves
Hypothetical
Resources
Speculative
Resources
“O
PP
OR
TU
NIT
Y C
OS
T” &
“S
US
TA
INA
BL
E
DE
VE
LO
PM
EN
T” P
AR
AD
IGM
S
Exploration via “extrapolation”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Based on: USBM & USGS (1980)
Slide 46 of 75
Mining & Exploration Group of Western Australia (MEGWA)
DISCOVERED RESOURCES
CONCEPTUAL EXPLORATION
EM
PE
RIC
AL
EX
PL
OR
AT
ION
UNDISCOVERED RESOURCES
Reserves Inferred
Reserves
Marginal
Reserves
Inferred
Marginal
Reserves
Sub-economic
Resources
Sub-
economic
Reserves
Hypothetical
Resources
Speculative
Resources
“O
PP
OR
TU
NIT
Y C
OS
T” &
“S
US
TA
INA
BL
E
DE
VE
LO
PM
EN
T” P
AR
AD
IGM
S
“SEARCH SPACE” PARADIGM
Exploration via “hypothesis”: Searching
for “undiscovered resources”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Based on: USBM & USGS (1980)
Slide 47 of 75
Mining & Exploration Group of Western Australia (MEGWA)
UNDISCOVERED
UNECONOMIC but
ACCESSIBLE
RESOURCES
DISCOVERED
INACCESSIBLE
ECONOMIC
RESOURCES
DISCOVERED
ECONOMIC but
INACCESSIBLE
(RESOURCES)
UNDISCOVERED
INACCESSIBLE but
ECONOMIC
(RESOURCES)
DISCOVERED
ACCESSIBLE but
UNECONOMIC
(RESOURCES)
UNDISCOVERED
UNECONOMIC but
ACCESSIBLE
(RESOURCES)
GEOLOGICAL CERTAINTY
EC
ON
OM
IC F
EA
SIB
ILIT
Y
DISCOVERED
ACCESSIBLE
and ECONOMIC
(CONCEPTUAL
RESERVES)
(Behind)
DISCOVERED but
INACCESSIBLE
UNECONOMIC
(RESOURCES)
UNDISCOVERED
INACCESSIBLE and
UNECONOMIC
(RESOURCES)
UNDISCOVERED
but ACCESSIBLE
ECONOMIC
(HYPOTHETICAL
RESERVES)
The resource cube inc. “accessibility”:
“Hypothetical reserve”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Sykes & Trench (2014)
Slide 48 of 75
Mining & Exploration Group of Western Australia (MEGWA)
But we actually need to know what a
reserve looks like in the future!
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Schodde (2014)
Slide 49 of 75
Mining & Exploration Group of Western Australia (MEGWA)
A thought on forecasting
21 May 2014
"Scythia has an abundance of soothsayers who foretell the future. They are judged by results and the losers are loaded on to oxcarts which are set
on fire.“
- Herodotus, 440BC
(NB: This is a paraphrasing by a former colleague at CRU – John Tomlinson)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 50 of 75
Mining & Exploration Group of Western Australia (MEGWA)
A thought on the future
21 May 2014
“My interest is in the future because I am going to spend the rest of my life there”
- Charles F. Kettering (American engineer, inventor of the electric starter, 1876-1958)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 51 of 75
Mining & Exploration Group of Western Australia (MEGWA)
The future is not unknown, just
uncertain (it’s only undiscovered)
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Images: Wikipedia
Thomas Bayes (1701-1761)
- An Essay towards solving a Problem in
the Doctrine of Chances (1765)
Thomas Chowder Chamberlin (1843-1928)
- The method of multiple working
hypotheses (1890)
Slide 52 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Forecasting / forward planning with
uncertainty: Probable versus plausible
21 May 2014
Bayesian mathematics (in minerals
exploration) - Kreuzer et al., 2008
Money
Divides
New
Horizons
Perfect
Storm Phoenix
Rising
Summary of Scenario Analysis on
mining industry and sustainability - Ali, 2010
! Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 53 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Forecasting / forward planning with
uncertainty: Avoiding chaos
21 May 2014
Predetermined
Uncertainty
Time horizon
Level
of
un
cert
ain
ty
Forecasting Scenarios Chaos
Chart based on: Vann (2012)
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 54 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Using “Multiple Working Hypotheses” to
stop a “controlling idea”
21 May 2014
Thomas Chowder Chamberlin
(1843-1928)
“The method of multiple
working hypotheses (1890)”
“The method of the ruling theory”
“…a premature explanation passes into a tentative theory, then into an adopted theory, and then into a ruling theory.”
“The method of the working hypothesis”
“Under the method of the ruling theory, the stimulus was directed to the finding of facts for the support of the theory. Under the
working hypothesis, the facts are sought for the purpose of ultimate induction…”
“…a controlling idea”
“…the method… is a marked improvement… but has its defects … the ease with which the hypothesis becomes a controlling idea. To
guard against this, the method of the multiple working hypotheses is urged.”
“The method of the multiple working hypotheses”
“The effort is to bring into view every rational explanation of new phenomena, and to develop every tenable hypothesis respecting their cause and history.”
Image: Wikipedia
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
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Mining & Exploration Group of Western Australia (MEGWA)
“Multiple working hypotheses” to
“multiple hypothetical reserves”
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
GEOLOGICAL CERTAINTY
EC
ON
OM
IC F
EA
SIB
ILIT
Y
“CONCEPTUAL
RESERVE”
MULTIPLE
“HYPOTHETICAL
RESERVES”
MULTIPLE
“HYPOTHETICAL
RESERVES”
MULTIPLE
“HYPOTHETICAL
RESERVES”
“HYPOTHETICAL
RESERVE”
DISCOVERED UNDISCOVERED
Source: Sykes & Trench (2014)
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Mining & Exploration Group of Western Australia (MEGWA)
Re-perceiving
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Source: Khong
(2014)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 2: How can Scandinavian crime
noire help minerals exploration?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
? Image: Guardian (http://www.theguardian.com/media/2013/sep/17/sky-
adapts-scandinavian-drama-the-bridge)
Image: The Telegraph
(http://www.telegraph.co.uk/culture/books/bookreviews/9243399/The-Killing-
by-David-Hewson-review.html)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 2: How can Scandinavian crime
noire help minerals exploration?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
?
“Predictors” not “detectives”
System: purpose (motive),
interaction (crime) & elements
(victim, weapon, criminal)
“Smoking” gun approach:
Multiple scenarios – if one thing
doesn’t add up, abandon or adjust - Vann & Stewart (2011); Cleland (2002)
Image: Guardian (http://www.theguardian.com/media/2013/sep/17/sky-
adapts-scandinavian-drama-the-bridge)
Image: The Telegraph
(http://www.telegraph.co.uk/culture/books/bookreviews/9243399/The-Killing-
by-David-Hewson-review.html)
Slide 59 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Quiz 2: How can Scandinavian crime
noire help minerals exploration?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
?
“Predictive exploration” System: purpose (getting copper),
interaction (mining, processing,
shipping) & elements (land,
labour, capital etc)
Image: Guardian (http://www.theguardian.com/media/2013/sep/17/sky-
adapts-scandinavian-drama-the-bridge)
Image: The Telegraph
(http://www.telegraph.co.uk/culture/books/bookreviews/9243399/The-Killing-
by-David-Hewson-review.html)
“Smoking” gun approach:
Multiple scenarios – if one thing
doesn’t add up, abandon or adjust - Vann & Stewart (2011); Cleland (2002)
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Mining & Exploration Group of Western Australia (MEGWA)
Bringing it altogether…
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
CRISCO
(2013)
Compliant
“Resource”
Geological In-principle “Theoretical
Reserve”
Geological
Ec
on
om
ic
In-principle “Accessible
Resource”
Ac
ce
ssib
le
Geological
CONSIDERS
ECONOMIC
POTENTIAL
INCORPORATES
SUSTAINABLE
DEVELOPMENT
Ec
on
om
ic
Geological
In-principle
“Conceptual
Reserve”
In-principle “Multiple
Hypothetical Reserves”
CONSIDERS
UNCERTAINTY
Source: Sykes & Trench (2014)
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Mining & Exploration Group of Western Australia (MEGWA)
Conclusions
• Controlling idea: Exploration has a minimal role in the future of the
copper industry
– Plenty of resources in place
– But low grade or in problematic jurisdictions
– Problems with sustainable development
– Higher prices required to make them economic
– New mining & processing technology needed to mitigate low grades and
environmental & social impact
• Alternative hypothesis: Exploration can open new “search space”
revealing new copper deposits that can be developed economically and
sustainably
• But it requires the building of conceptual exploration capabilities
– Bringing economics into exploration
– Incorporating sustainable development
– Looking into an uncertain the future… …how do we do this?
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
• Surveyed the existing
knowledge
• Came up with an
alternate hypothesis
• Tested the hypothesis
• Thought they were right
• Were actually wrong
(repeatedly)
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image: Karen Kavett (http://karenkavett.com/blog/943/making-of-guess-who-doctor-who-edition.php)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
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Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Answer:
Discovering
America!
Image: Wikipedia (http://en.wikipedia.org/wiki/Christopher_Columbus)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
• Existing knowledge: go east to
get east (Indies)
• Alternate hypothesis: go west
to get east
• Tested hypothesis: sailed west
• Right? Thought he reached the
east (three times)
• Wrong? Had actually reached
the Caribbean (West Indies)
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image: Wikipedia (http://en.wikipedia.org/wiki/Christopher_Columbus)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
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Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Moral of the
story:
Good questions
help manage
serendipity?
Image: Wikipedia (http://en.wikipedia.org/wiki/Christopher_Columbus)
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Mining & Exploration Group of Western Australia (MEGWA)
Quiz 1: What is this person famous for?
Bonus points
• What is success? (Discovering America vs “being
right”)
• Good questions point others in the right direction
(Magellan)
• Economic motivation to exploration (Spice Islands)
• But requires economic opportunism (looking for
spices but found Mexican & Peruvian silver)
• Alternative funding methods (Spanish not Portuguese
funded)
• Beware the historical record (flat world, Columbus
discovered America)
• Commercialisation = discovery (Vikings & Chinese)
• Discovery is relative (Native Americans)
• Explorers make terrible managers (Columbus a
tyrant)
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Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image: Wikipedia (http://en.wikipedia.org/wiki/Christopher_Columbus)
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Mining & Exploration Group of Western Australia (MEGWA)
Now back to work…
“Be a philosopher;
but, amidst all
your philosophy,
be still a man” – David Hume An Enquiry Concerning Human
Understanding (1748)
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Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Image: Wikipedia (http://en.wikipedia.org/wiki/David_Hume)
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Mining & Exploration Group of Western Australia (MEGWA)
Further reading
• Sykes, J.P., & Trench, A., 2014. Resources versus Reserves:
Towards a systems-based understanding of exploration and mine
project development and the role of the mining geologist. AusIMM
Ninth International Mining Geology Conference. Adelaide,
Australia. August.
• Sykes, J.P., & Trench, A., 2014. Finding the copper mine of the
21st century: Conceptual exploration targeting for hypothetical
reserves. Society of Economic Geologists Conference. Colorado,
USA. September.
• Trench, A., Packey, D., & Sykes, J.P., 2014. Non-technical risks
and their impact on mining. AusIMM Monograph 30 on Mineral
Resource & Ore Reserve Estimation. Chapter 7: Risk in Resource
and Reserve Estimation.
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
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Mining & Exploration Group of Western Australia (MEGWA)
Other references [1] • Agricola, Georgius. 1556. De Re Metallica. 1950 Translation from the First Latin Edition of 1556. Translated by Herbert
C. Hoover and Lou H. Hoover. New York, USA: Dover Publications.
• Ali, Saleem H. 2010. Treasures of the Earth: Need, Greed, and a Sustainable Future. New Haven, USA: Yale University
Press.
• Anglo American. 2013. Anglo American statement re: Pebble project. 16th September.
http://www.angloamerican.com/media/releases/2013pr/2013-09-16.
• Bayes, Thomas , and Richard Price. 1765. "An Essay Towards Solving a Problem in the Doctrine of Chance. By the Late
Rev. Mr. Bayes, Communicated by Mr. Price, in a Letter to John Canton, MA and FRS." Philosophical Transactions of
the Royal Society of London 53 (0): 370-418. doi: http://dx.doi.org/10.1098/rstl.1763.0053.
• BHP Billiton. 2012. Olympic Dam Update. 6th December.
http://www.bhpbilliton.com/home/investors/news/Pages/Articles/Olympic-Dam-Update.aspx.
• Cairns, Chris, Jon Hronsky, and Richard Schodde. 2010. Market Failure in the Australian Mineral Exploration Industry:
The Case for Fiscal Incentives. Perth, Australia: Australian Institute of Geoscientists.
• Chamberlin, T. C. 1890. "The Method of Multiple Working Hypotheses." Science ns-15 (366): 92-96. doi:
http://dx.doi.org/10.1126/science.ns-15.366.92.
• Cleland, Carol. E. 2002. Methodological and Epistemic Differences between Historical Science and Experimental
Science. Philosophy of Science, 69 (September). pp. 474–496. 0031-8248/2002/6903-0000
• Committee for Mineral Reserves International Reporting Standards (CRIRSCO). 2013. International Reporting Template
for the Public Reporting of Exploration Results, Mineral Resources and Minerals Reserves. London, UK: International
Council of Mining & Metals (ICMM). http://www.crirsco.com/crirsco_template_may2013.pdf.
• Cook, Peter J., and Daniel Sheath. 1997. "World Mineral Resources and Some Global Environmental Issues." Nature &
Resources 33 (1): 26-33. http://www.unesco.org/ulis/cgi-
bin/ulis.pl?catno=109603&set=52B2ABC1_0_167&gp=1&lin=1&ll=1.
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
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Mining & Exploration Group of Western Australia (MEGWA)
Other references [2] • Crowson, Phillip. 2012. "Some Observations on Copper Yields and Ore Grades." Resources Policy 37 (1): 59-72. doi:
http://dx.doi.org/10.1016/j.resourpol.2011.12.004.
• Edelstein, Daniel L. 2004. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/coppemcs04.pdf.
• Edelstein, Daniel L. 2005. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/coppemcs05.pdf.
• Edelstein, Daniel L. 2006. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/coppemcs06.pdf.
• Edelstein, Daniel L. 2007. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/coppemcs07.pdf.
• Edelstein, Daniel L. 2008. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2008-coppe.pdf.
• Edelstein, Daniel L. 2009. Mineral Commodity Summaries: Copper. Reston, USA United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2009-coppe.pdf.
• Edelstein, Daniel L. 2010. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2010-coppe.pdf.
• Edelstein, Daniel L. 2011. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2011-coppe.pdf.
• Edelstein, Daniel L. 2012. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2012-coppe.pdf.
• Edelstein, Daniel L. 2013. Mineral Commodity Summaries: Copper. Reston, USA: United States Geological Survey
(USGS). http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2013-coppe.pdf.
• Eggert, Roderick G. 2013. "Chapter 13: Mining, Sustainability and Sustainable Development." In Monograph 29: Mineral
Economics, eds Philip Maxwell and Pietro Guj, 215-230. Melbourne, Australia: Australian Institute of Mining & Metallurgy.
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
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Mining & Exploration Group of Western Australia (MEGWA)
Other references [3] • Elkington, John. 1999. Cannibals with Forks: The Triple Bottom Line of 21st Century Business. New ed. Oxford, UK:
Capstone.
• Herodotus. 2012. The Histories (440BC). eBook edition. Start Publishing.
• Hronsky, Jon M. A. 2009. "The Exploration Search Space Concept: Key to a Successful Exploration Strategy." Centre for
Exploration Targeting Quarterly News (8): 14-15. http://www.cet.edu.au/research-
outcomes/newsletters/june_newsletter_09_web.
• Hronsky, Jon M. A., and David I. Groves. 2008. "Science of Targeting: Definition, Strategies, Targeting and Performance
Measurement." Australian Journal of Earth Sciences 55 (1): 3-12. doi: http://dx.doi.org/10.1080/08120090701581356.
• International Copper Study Group (ICSG). 2012. The World Copper Factbook. Lisbon, Portugal.
http://www.icsg.org/index.php/component/jdownloads/finish/170/1188.
• Hume, David., and Selby-Bigge, L.A. 2006. An Enquiry Concerning Human Understanding (Reprinted from Posthumous
Edition of 1777). Second Edition (1902). Project Gutenberg Ebook.
• International Copper Study Group (ICSG). 2013. Copper: Preliminary Data for May 2013 (Press Release). Lisbon,
Portugal. http://www.icsg.org/index.php/component/jdownloads/finish/114/1587?Itemid=.
• Jacks, David S. 2013. From Boom to Bust: A Typology of Real Commodity Prices in the Long Run. Cambridge, USA:
National Bureau of Economic Research. http://www.nber.org/papers/w18874.
• Khong, Cho. 2014. Re-perceiving and scenario thinking. Oxford Scenarios Programme. 28th April.
• Kreuzer, Oliver P., Michael A. Etheridge, Pietro Guj, Maureen E. McMahon, and Darren J. Holden. 2008. "Linking Mineral
Deposit Models to Quantitative Risk Analysis and Decision-Making in Exploration." Economic Geology 103 (4): 829-850.
• Lagos, Gustavo. 2010. "Mining and Economic Development in Chile." In National University of Mongolia, Mineral Policy
Forum, Ulan Bator, Mongolia. Mining Centre, Catholic University of Chile.
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 72 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Other references [4] • Meadows, Donella H., Dennis L. Meadows, Jørgen Randers, and William W. Behrens III. 1972. The Limits to Growth: A
Report for the Club of Rome's Project on the Predicament of Mankind. New York: Universe Books.
• Meadows, Donella H., Jorgen Randers, and Dennis L. Meadows. 2004. Limits to Growth: The 30-Year Update: Chelsea
Green Publishing Company.
• Metal Pages. 2014. Copper Metal Prices, News and Information. Accessed 14 February, https://www.metal-
pages.com/metals/copper/metal-prices-news-information/.
• Mudd, Gavin M., Zhehan Weng, and Simon M. Jowitt. 2013. "A Detailed Assessment of Global Cu Resource Trends and
Endowments." Economic Geology 108 (5): 1163-1183. doi: http://dx.doi.org/10.2113/econgeo.108.5.1163.
• Otto, James M., and John Cordes. 2000. Sustainable Development and the Future Mineral Investment: Colorado School
of Mines, Metal Mining Agency of Japan & United Nations Environment Programme.
• Rio Tinto. 2014. Rio Tinto gifts stake in Northern Dynasty Minerals to Alaskan charities. 7th April.
http://www.riotinto.com/media/media-releases-237_10183.aspx.
• Schodde, Richard C. 2006. "What Do We Mean by a World-Class Deposit? And Why Are They Special?" In Association
of Mining and Exploration Companies (AMEC) Conference, Perth, Australia.
• Schodde, Richard C. 2010. "The Key Drivers Behind Resource Growth: An Analysis of the Copper Industry over the Last
100 Years." In 2010 MEMS Conference Mineral and Metal Markets over the Long Term Joint Program with the SME
Annual Meeting, Phoenix, USA. MinEx Consulting. http://www.minexconsulting.com/publications/mar2010c.html.
• Schodde, Richard C. 2012. "Recent Trends in Copper Exploration - Are We Finding Enough ?" In PDAC, Toronto,
Canada. MinEx Consulting. http://www.minexconsulting.com/publications/aug2012a.html.
• Schodde, Richard C. 2014. "Key issues affecting the time delay between discovery and development - is it getting harder
and longer?" In 34th International Geological Congress, Brisbane, Australia. MinEx Consulting.
http://www.minexconsulting.com/publications/aug2012a.html.
21 May 2014
Finding the Copper Mine of Tomorrow: In search of hypothetical "reserves"
Slide 73 of 75
Mining & Exploration Group of Western Australia (MEGWA)
Other references [5] • Schodde, Richard C., and Jon M. A. Hronsky. 2006. "Chapter 4: The Role of World-Class Mines in Wealth Creation." In
Special Publication 12, 71-90. Littleton, USA: Society of Economic Geologists.
• Singer, Donald A. 1995. "World Class Base and Precious Metal Deposits; a Quantitative Analysis." Economic Geology 90
(1): 88-104. doi: http://dx.doi.org/10.2113/gsecongeo.90.1.88.
• Society of Petroleum Engineers (SPE), American Association of Petroleum Geologists (AAPG), World Petroleum Council
(WPC), Society of Petroleum Evaluation Engineers (SPEE), and Society of Exploration Geophysicists (SEG). 2011.
Guidelines for Application of the Petroleum Resources Management System. Richardson, USA.
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• Tilton, John E. 2003. On Borrowed Time? Assessing the Threat of Mineral Depletion. Kindle ed. Washington DC, USA:
Resources for the Future.
• United States Bureau of Mines (USBM), and United States Geological Survey (USGS). 1980. Principles of a
Resource/Reserve Classification for Minerals. Reston, USA.
• United States Department of Labor (USDL). 2014. Bureau of Labor Statistics - Consumer Price Index - All Urban
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• United States Geological Survey (USGS). 2012. Copper Statistics. Reston, USA.
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• Vann, John, Scott Jackson, Alan Bye, Stephen Coward, Sorousha Moayer, Grant Nicholas, and Rodney Wolff. 2012.
"Scenario Thinking: A Powerful Tool for Strategic Planning and Evaluation of Mining Projects and Operations
(Presentation)." In AusIMM Project Evaluation Conference, Melbourne, Australia.
• Vann, John, and Mike Stewart. 2012. "Philosophy of science: a practical tool for applied geologists in the minerals
industry“. Applied Earth Science (Trans. Inst. Min. Metall. B). 120 (1) pp21-30. DOI 10.1179/1743275811Y.0000000018
• World Commission on Environment and Development (WCED). 1987. Our Common Future. Oslo, Norway.
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Mining & Exploration Group of Western Australia (MEGWA)
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