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Assessing the returns to copper exploration, 1989-2008

M. D. Doggett and R. A. Leveille
Assessing the returns to copper exploration, 1989-2008
Exploration and Mining Geology (January 2010) 19 (1-2): 23-33


Economic returns for the copper industry have been assessed by building cash flow models for each of the 100 new mines brought into production over the past 20 years. Ninety-one of the 100 new mines returned the assumed 8% cost of capital and generated a positive net present value (NPV) at the development decision point. Economic criteria for individual mines are highly variable with NPV ranging from -$111 million (-$111M) to +$3850M (all money values are presented in United States dollars) and internal rate of return (IRR) ranging from -8% to +95%. The copper industry collectively would generate approximately $39 billion dollars in NPV through the development of the 100 new mines. The returns to exploration ($174M per deposit) were measured by deducting the cost of exploration per deposit ($221M) from the returns to development per deposit ($395M). Overall, the copper business has provided positive returns to exploration. However, the variability in returns across deposits means that only 41 of the 100 new mines can carry the average cost of exploration. The long lead times and high costs associated with exploration result in only those deposits with large amounts of contained copper being able to cover the average finding cost of the industry. The returns to development and exploration are shown to be highly sensitive to the cost of capital and metal price assumptions. With respect to deposit type, porphyry deposits are both larger (NPV) and exhibit lower profitability (IRR) than the nonporphyry deposits. On a geographic basis, returns to development and exploration are higher in Chile than elsewhere, reflecting the larger average deposit size and lower average exploration cost per deposit.

ISSN: 0964-1823
Serial Title: Exploration and Mining Geology
Serial Volume: 19
Serial Issue: 1-2
Title: Assessing the returns to copper exploration, 1989-2008
Affiliation: HanOcci Mining Advisors, Vancouver, BC, Canada
Pages: 23-33
Published: 201001
Text Language: English
Summary Language: French
Publisher: Canadian Institute of Mining, Metallurgy and Petroleum, Montreal, QC, Canada
References: 41
Accession Number: 2010-095262
Categories: Economic geology, geology of ore deposits
Document Type: Serial
Bibliographic Level: Analytic
Illustration Description: illus. incl. 6 tables
S56°00'00" - S17°45'00", W76°00'00" - W67°00'00"
Secondary Affiliation: Freeport McMoRan Exploration, USA, United States
Country of Publication: Canada
Secondary Affiliation: GeoRef, Copyright 2017, American Geosciences Institute. Abstract, Copyright, Geological Society of CIM. Reference includes data from GeoScienceWorld, Alexandria, VA, United States
Update Code: 201050
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