OCTOBER 2010 • No 83 SEG NEWSLETTER 11

Views columns are the opinions of the authors and do not necessarily reflect the opinions of SEG. SEG members are
invited to submit opinion pieces of 1000-2000 words on an issue facing economic geology. Authors may wish to send a
50-word synopsis for consideration ([email protected]; subject line, Views). Letters to the Editor on past Views columns, up
to 300 words, are also welcome.

VIEWS I
Grassroots Exploration: Between a Major Rock
and a Junior Hard Place
Peak metal—the time when demand for districts are traditionally discovered, can explorers, although
certain metals exceeds supply, irrespec- be sustained at something approaching their near-mine †
tive of how much is spent on explo- historical levels. Grassroots exploration (brownfields) explo- RICHARD H. SILLITOE
(SEG 1976 F)
ration and recycling (e.g., Sverdrup et has made major contributions to the ration efforts have
al., 2009)—is nigh according to a grow- global metal inventory (Table 1) and, recently been
ing number of its adherents, but mainly arguably, remains a prerequisite if we rewarded with a
from outside the mining industry. are to satisfy long-term metal demands. number of outstanding discoveries, per-

VIEWS–REVIEWS
Nonetheless, it is being increasingly haps most notably in the porphyry cop-
remarked that the number of discoveries per belts of northern and central Chile.
of major metal deposits appears to be
DECLINING GRASSROOTS The majors’ appetite for exploration in
dwindling and the cost per discovery ris- ACTIVITY frontier and emerging provinces, where
ing (e.g., Dummett, 2000; Horn, 2002; It is becoming abundantly clear, how- much grassroots work needs to be
Hall, 2010). Many mining professionals, ever, that there is a progressive focused, is diminishing because of
however, subscribe to the view that decrease in the proportion of explo- increased adversity to both the demon-
metal supply will continue to meet soci- ration funds being devoted to grassroots strated and perceived financial, political,
ety’s growing demands for the foresee- activities, irrespective of the position in social, and personal risks involved. The
able future, notwithstanding the enor- the economic cycle and, hence, total growing influence of Chinese capital on
mous projected requirements of the annual exploration expenditures. the Australian, African, and South
large urbanizing and industrializing Currently, less than one-third of explo- American mining scenes seems likely to
nations, specifically China and India ration expenditure, both by the world’s reduce even further the amount of grass-
(e.g., Crowson, 2008). This view, how- largest companies and industry wide, roots work conducted there. Clearly, the
ever, would appear to take for granted including the junior sector, is assigned opportunity for continued brownfields
that abundant but currently subeco- to grassroots work (Metals Economics success in any mining district is finite,
nomic resources will eventually be Group, 2010; PriceWaterhouseCoopers, and the widely touted concept of junior
exploited and that grassroots (early- 2010). Furthermore, the grassroots pro- companies being able to supply the
stage, greenfields) exploration, by which portion of worldwide exploration bud- grassroots pipeline is, at best, question-
many new metal provinces, belts, and gets dropped from 53 to 32 percent able. Furthermore, while acquisition of
between 1996 and 2009, with 41 per- resources via mergers or takeovers may
Richard Sillitoe graduated from the cent of this latter year’s total being be an economically attractive option for
University of London, England, where he went raised and spent by the junior sector some in the major and mid-tier sectors,
on to obtain a Ph.D. degree in 1968. After
(Metals Economics Group, 2010); how- it adds essentially nothing to global
working for the Instituto de Investigaciones
Geológicas (Geological Survey of Chile) and ever, this percentage is considered an metal inventories as well as seriously
then returning to the Royal School of Mines at overestimate because it includes activi- reducing total exploration expenditure.
the University of London as a Shell postdoc- ties that would not be classified here as The junior explorers are under con-
toral research fellow, he has operated for the grassroots. Major and mid-tier compa- stant pressure from their investors, par-
last 38 years as an independent consultant to nies that still advocate long-term grass- ticularly the hedge funds as well as most
more than 500 mining companies, interna-
roots exploration and have been suc- brokers and mining analysts, to provide
tional agencies, and foreign governments. He
has worked on a wide variety of precious-, cessful at it (e.g., AngloGold Ashanti in quick, even instant exploration success,
base-, and lithophile-metal deposits and Colombia; Lodder et al., 2010) are which normally translates into poten-
prospects in 90 countries worldwide, but becoming a rarity nowadays. tially ore-grade drill intercepts and
focuses primarily on the epithermal gold and The decrease in the share of explo- resource statements. The lead times
porphyry copper environments. His specialty is ration expenditure assigned to grass- involved in grassroots work, typically no
deposit modeling using field observations and less than five years, are simply too long
roots activities may be attributed to a
drill core. Published research has earned him
awards in Europe, Australia, and North variety of causes, some of which tend to for the attention spans of most investors.
America, including the Silver Medal of the be fundamentally different for the A drainage or soil geochemical anomaly
Society of Economic Geologists, of which he major and junior sectors. Nevertheless, generated as part of an inspired grass-
was President in 1999–2000. the reduced expectation of discovery in roots program is of minimal interest to
grassroots environments seems to be a the market, and will certainly do little
†27 West Hill Park, Highgate Village,
common deterrent. In their present for a company’s stock price. Therefore,
London N6 6ND, England; e-mail, guise, many major companies are much junior exploration
[email protected] becoming dysfunctional grassroots effort tends to be devoted to page 12
...
 12 SEG NEWSLETTER No 83 • OCTOBER 2010

... from 11 Views I (Continued)

TABLE 1. Examples of Preeminent Grassroots Exploration Discoveries essence as a contractor, but typically
must have a demonstrated track record
Leading to of discovery or, at the very least, a con-
Deposit, Discoverer, eventual Discovery
vincing story! Majors could also make
location Deposit type year definition of: description
parts of their grassroots land holdings
Serra dos Banded Fe United States Carajás (world’s Machamar available to judiciously selected junior
Carajás, Brazil formation Steel, 1967 largest) Fe district et al. (1991) explorers. Obviously, whatever the
Panguna, Southwest Pacific business arrangement, the junior com-
Papua Porphyry CRA Explora- porphyry Cu-Au Knight pany must retain a meaningful partici-
New Guinea Cu-Au tion, 1964 province et al. (1973) pation in any discovery and, if it is a
Kambalda, Western Western Australia Woodall and listed company, continue to conduct
Western Australia Magmatic Ni Mining, 1966 Ni province Travis (1970) lower risk exploration elsewhere in
Carlin, Nevada Sediment- Newmont, Carlin and other Coope order to placate the market. More inte-
hosted Au 1962 Nevada Au trends (1991) grated business relationships between
major and junior companies are clearly
Rabbit Lake, Athabasca Basin
Saskatchewan, Unconformity- Gulf Minerals (world’s largest) Reeves and
advantageous, as discussed recently in
Canada related U Canada, 1968 U province Beck (1982) these columns (Hall, 2010).
VIEWS–REVIEWS

A strong case also can be made for

Olympic Dam, Fe oxide- Western Olympic Haynes
majors to create and carry out their own
South Australia Cu-Au-U Mining, 1975 IOCG trend (2006)
grassroots programs without junior com-
pany involvement. For example, the for-
to long-known prospects, many of them missals from several exploration divi-
mation of consortiums might be consid-
either handed on by the majors or sim- sions during the 2008–2009 financial
ered, which would result in the pooling
ply recycled, where promotional drilling crisis. The resulting savings were token,
of capital, expertise, and influence in
results are more readily achievable. As a at the expense of a massive loss of cor-
order to reduce or at least apportion the
result, it is estimated that perhaps only porate memory and future exploration
perceived risk (and, hopefully, the bureau-
10 to 20 percent of worldwide junior effectiveness, not to mention image.
budgets are actually spent on true grass- cracy) of carrying out grassroots work in
roots activities. prospective regions (e.g., Horn, 2002). A
SOME POSSIBLE REMEDIES spectacularly successful arrangement of
The widely discussed reduction in
If long-term metal supply is to be this type between Utah International
field time by explorationists over the last
two decades, particularly in the major assured, the major, mid-tier, and junior and Getty Oil Company resulted in dis-
companies but also in many juniors as sectors need to expand and refocus covery of the Escondida porphyry cop-
well, has also undoubtedly had a nega- their grassroots exploration efforts, a per deposit in Chile (Lowell, 1991).
tive impact on grassroots exploration, in change which implies the need for Indeed, many major mines today are
which fieldwork is the all-important greater implementation of innovative owned and operated by two or more
component. Most of us know why ever business approaches and associations. companies (e.g., Antamina, Peru), so
more time is being spent in the office: Clearly, the current industry structure why not simply create the company
the burgeoning bureaucracy created by and mindset are not, and never will be, associations at the outset? This approach
the increased need to document and ver- conducive to effective grassroots work. is prevalent in the oil industry, primar-
ify issues related to human resources, A spectrum of business relationships ily as a means of risk mitigation.
social responsibility, environmental already exists between major and mid- Another attractive possibility might be
stewardship, and health and safety; the tier companies and their junior coun- for majors to create autonomous explo-
proliferation of technical reporting terparts, and could be readily redirected ration subsidiaries that could theoreti-
requirements; and the all-pervasive to stimulate grassroots programs. A cally have more freedom to conduct
obsession with computerized data major may seek out a junior partner grassroots exploration. Such subsidiaries
manipulation and communications. In holding an attractive grassroots land could be wholly owned by the parent,
many companies, excessive amounts of position, the latter without the inclina- mirroring Bear Creek Mining’s highly
time are spent on indiscriminately col- tion and/or funding to carry out the successful role in Kennecott during the
lecting and collating masses of geologic, necessary technical work. The major 1950s to 1970s, or partly owned by two
geochemical, and, particularly, geophys- may supply the funding and/or take a or more majors and with or without
ical data and not enough time spent on minority equity stake in the junior; and outside investor participation. Today,
critically thinking about what is really the major, the junior, or both in collab- the creation of exploration subsidiaries
important (the data-rich, knowledge- oration may conduct the program. The seems to be out of favor, although
poor environment; Thompson, 2009). A converse is also eminently feasible: the EMSA’s function as the Chilean explo-
further problem militating against junior with an unexplored grassroots ration arm of Codelco is a notable
effective grassroots exploration is the land position or simply a novel metal- and successful exception. While it is
continued failure of many majors (and logenic concept that requires testing accepted that an exploration subsidiary
also some juniors, for that matter) to may approach a suitable and poten- would have to operate under most of
properly value the cumulative experi- tially interested major for funding. In the same corporate constraints as the
ence of their geologic teams; this was this case, the junior carries out a mutu- parent company(ies), at least these
shown yet again by the knee-jerk dis- ally agreed-upon technical program, in constraints
OCTOBER 2010 • No 83 SEG NEWSLETTER 13

might be tailored more explicitly to concerted effort to educate institutional imposts is once again on the political
exploration than to mining, processing, and private investors of the need for ascendancy (Ernst & Young, 2010).
and marketing, leading to correspond- and potential benefits of grassroots
ingly greater operational freedom and exploration should be considered, with
REFERENCES
flexibility. Transfer of seasoned geosci- emphasis being placed on the end
Broughton, D., and Rogers, T., 2010, Discov-
entific staff, generally accepted as being product: discovery of a completely new
ery of the Kamoa copper deposit, Central
the most effective explorationists (e.g., metal province or district and the sub- African Copperbelt, D.R.C.: Society of
Thompson and Kirwin, 2010), from the stantial profits that would inevitably Economic Geologists Special Publication
parent to the subsidiary could result in ensue. The education process might be 15, p. 287–297.
their being liberated from at least some facilitated if junior consortiums were Coope, J.A., 1991, Carlin trend exploration
of the time-consuming paper-pushing, formed for the specific purpose of under- history: Discovery of the Carlin deposit:
Nevada Bureau of Mines and Geology
thereby enabling them to focus much taking high-profile grassroots projects. Special Publication 13, 16 p.
more on technical matters. If renewed expansion of grassroots Crowson, P., 2008, Mining unearthed:
It is unrealistic to imagine that the activity can be achieved using one or London, Aspermont UK, 423 p.
current structure of the world’s stock mar- more of the above corporate means, the Dummett, H.T., 2000, Minerals resource
kets can be altered to facilitate improved exploration community must make its development—our new challenges: Mining
Engineering, v. 52, no. 7, p. 37–42.
exploration practices, so junior compa- own significant contributions by adopt-
Ernst & Young, 2010, Business risks facing
nies intent on grassroots work need to ing a more grassroots-oriented mental- mining and metals: http://www.mining-jo
devise alternative corporate strategies. ity. Specifically, explorationists need to urnal.com/__data/assets/article_file_attach
Clearly, the best but probably the most think much more about ore deposit ment/0015/223620/E-and-Y-Report.pdf, 28 p.

VIEWS–REVIEWS
difficult strategy is to seek venture-capital models and global metallogeny. Ques- Hall, D.J., 2010, Exploration and discovery:
funding from nonlisted companies, high- tions they need to pose might include Paradigm shift required: SEG Newsletter 82,
p. 15–17.
net-worth individuals, or private syndi- the following: Which ore deposit type(s) Haynes, D., 2006, The Olympic Dam ore
cates, thereby gaining independence could be present in that underexplored deposit discovery—A personal view: SEG
from the dictates of the market. The region?; Could some of the world’s Newsletter 66, p. 1, 8–15.
well-endowed sovereign wealth funds apparently unmineralized terranes in Horn, R., 2002, Metals exploration in a chan-
and perhaps even private equity funds fact contain unsuspected ore deposit ging industry: CIM Bulletin, v. 95, p. 35–48.
Johnson, L., 2010, The entrepreneur: Finan-
might also conceivably play a role here types?; and, perhaps most difficult of
cial Times, August 18, p. 10.
if they can be persuaded that grassroots all, Could this combination of geologic Knight, C.L., Fraser, R.B., and Baumer, A.,
exploration accrues value. The prospec- factors suggest the existence of a previ- 1973, Geology of the Bougainville copper
tive financiers obviously need to under- ously undocumented ore deposit type? orebody, New Guinea: Bureau of Mineral
stand the exploration process and be Resources [Australia], Geology and Geo-
fully conversant with the inherent risks physics Bulletin 141, p. 123–133.
and long lead times likely to be involved CONCLUSIONS Lodder, C., Padilla, R., Shaw, R., Garzon, T.,
Palacio, E., and Jahoda, R., 2010, Discovery
in grassroots discovery. This stipulation Grassroots exploration is the lifeblood history of the La Colosa gold porphyry
implies, of course, that the major min- of discovery; without it, future metal deposit, Cajamarca, Colombia: Society of
ing companies themselves would be the supply, even taking account of changes Economic Geologists Special Publication 15,
ideal source of such funding. Therefore, in technology, may not manage to p. 19–28.
Lowell, J.D., 1991, The discovery of the La
perhaps they need to seriously consider keep pace with the demands imposed
Escondida orebody: Economic Geology
grub-staking small (two- or three-person) by worldwide population growth and Monograph 8, p. 300–313.
groups of creative individuals with economic development. The remedies Machamar, J.F., Tolbert, G.E., and L’Esperánce,
proven track records of discovery, in considered here require major, mid-tier, R.L., 1991, The discovery of Serra dos
essence corporate venturing, rather than and junior companies as well as suit- Carajás: Economic Geology Monograph 8,
spending a large budgetary share on ably talented individuals to devise p. 275–285.
Metals Economics Group, 2010, World ex-
bureaucracy. Alternatively, a major innovative means of collaborating on ploration trends: www.metalseconomics-
could create some sort of formal partner- grassroots exploration as well as the group.com, 7 p.
ship with one or more recognized but provision of more generous funding to PriceWaterhouseCoopers, 2010, Mine—back
independent explorationists, the implant make this possible. The suggestions are to the boom: www.pwk.co.uk, 47 p.
entrepreneurship advocated by Johnson not new and seem unlikely to be the Reeves, P.L., and Beck, L.S., 1982, A history
of uranium exploration in the Athabasca
(2010). A fine recent example of grass- panacea but, in combination, they
Basin, in Hanula, M.R., ed., The discoverers:
roots exploration success by a nonlisted might begin to redress the decline in Toronto, Pitt Publishing Company, p.
explorer, Ivanhoe Nickel & Platinum, is the grassroots component of explo- 153–161.
provided by the Kamoa discovery in the ration. While accepting that mining, Sverdrup, H., Koca, D., and Robért, K.H., 2009,
Central African Copperbelt of the DRC like any other industry, is principally Towards a world of limits: The issue of
(Broughton and Rogers, 2010). designed to create wealth for its human resource follies [abs.]: Geochimica
et Cosmochimica Acta, v. 73, p. A1298.
Over and above the juniors that asso- investors, albeit in an increasingly sus- Thompson, J.F.H., 2009, Taking advantage
ciate themselves in some way with major tainable fashion, it should not be for- of time: SEG Newsletter 78, p. 7.
or mid-tier companies, as discussed gotten that we also have an obligation Thompson, J.F.H., and Kirwin, D.J., 2010,
above, an extremely small minority of to provide adequate metal inventories Exploration–people and discovery: SEG
listed juniors gain investor support for for future generations. This fact should Newsletter 81, p. 17–19.
Woodall, R., and Travis, G.A., 1970, The
business models focused on grassroots also not be forgotten by state, provin-
Kambalda nickel deposits, Western Aus-
exploration of frontier terranes (e.g., cial, and federal governments world- tralia: Commonwealth Mining and Metal-
James Bay lowlands, northern Ontario; wide as resource nationalism in the lurgical Congress, 9th, London, 1969,
Afar, Ethiopia and Djibouti). Perhaps a form of increased, commonly excessive Proceedings, v. 2, p. 517–533. 1