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Future(s) of mineral exploration - Sykes et al - Apr 2017 - Centre for Exploration Targeting

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Future(s) of mineral exploration - Sykes et al - Apr 2017 - Centre for Exploration Targeting

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Future(s) of mineral exploration - Sykes et al - Apr 2017 - Centre for Exploration Targeting

  1. 1. The future(s) of minerals exploration John P. Sykes123, Allan Trench124 & T. Campbell McCuaig15 1. Centre for Exploration Targeting, School of Earth Sciences, The University of Western Australia; 2. Business School, The University of Western Australia; 3. Greenfields Research Ltd., United Kingdom; 4. CRU Group Ltd., United Kingdom; 5. BHP Billiton Ltd., Australia Email: john.sykes@research.uwa.edu.au Acknowledgements: The authors would like to thank Sandra Occhipinti (CET, UWA), Nicolas Thebaud (CET, UWA), Mark Lindsay (CET, UWA) and the other organisers of TARGET 2017 for their efforts in organising this conference. John would like to acknowledge the support of the non-authoring members of his PhD supervision team: Mark Jessell (UWA-CET) and Nicolas Thebaud; as well as the financial support of a Centre for Exploration Targeting ‘Ad hoc’ scholarship and an Australian Government Research Training Program Scholarship. The authors would like to thank the participants in the three CET “Future of Minerals Exploration” Scenarios Workshops: Jonathan Bell (CET, Curtin), Leila Ben Mcharek (Muslim Studies, UWA), Rob Bills (Emmerson Resources), Aida Carneiro (Mining Engineering, UWA), Ivy Chen (CSA Global), Aaron Colleran (Evolution Mining), Tim Craske (Geowisdom), Liz Dallimore (KPMG), Deon deBruin (Diamond Indicator Minerals), Edoaldo Di Dio (Calibre Projects), Joe Dwyer (HiSeis), Mayara Fraeda (CET-UWA), Nick Franey (NFJ Consulting), Simon Gatehouse (BHP Billiton), Jeremie Giraud (CET, UWA), Marcelo Godefroy Rodriguez (CET, UWA), Chris Gonzalez (CET, UWA), Isabel Granado (Information Systems, Curtin), Matt Greentree (SRK Consulting), David Groves (CET, UWA), Mike Haederle (Rio Tinto), Mike Hannington (Metalicity), Nick Hayward (Teck), Amanda Hellberg (Law, UWA), Paul Hodkiewicz (Anglo American), Amy Imbergamo (Environmental Science, UWA), Constanza Jara (CET, UWA), Caroline Johnson (CSIRO), Heta Lampinen (CET, UWA), Helen Langley (Law, UWA), John Libby (Digirock), Martin Lynch (Author of “Mining in World History”), Stuart Masters (CS-2 Consulting), Michael Mead (Gold Fields), Adele Millard (Anthropology, UWA), Joanne Moo (Environmental Science, UWA), Suzanne Murray (Billabong Gold), Sandra Occhipinti, Ahmad Saleem (CET, UWA), Ian Satchwell (PerthUSAsia Centre), Robert Sills (Sills Strategic Materials), John Southalan (Law, UWA), David Stevenson (CET, UWA), Narendran Subramaniam (Transmin), Siobhan Sullivan (Plant Biology, UWA), Daniel Sully (Teck), Janet Sutherland (Business, Curtin), Marcus Tomkinson (MMG), Marnie Tonkin (Anthropology, UWA), Jan Tunjic (CET, UWA), Will Turner (Independent Geological Consultant), Stanislav Ulrich (AngloGold Ashanti), Jessica Volich (BHP Billiton), Wenchao Wan (Chemical Engineering, UWA), Peter Williams (HiSeis), Marcus Willson (CSA Global) and Afira Zulkifli Tahmali (Environmental Science, UWA). John would also like to thank Steve Beresford (Independence Group), Jon Hronsky (Western Mining Services), Robbie Rowe (NextGen Geological), Richard Schodde (MinEx Consulting), John Vann (Anglo American) and the members of #explorationtalk for the continued support, guidance and championing of this research. References Andrews, T., Harman, J., Horgan, M., & Volich, J., 2016, ‘Future licence to prosper’ key to unlock mining sustainability, Centre for Exploration Targeting News & Events, 19 February: http://www.cet.edu.au/news-and- media/news/news-details/2016/02/19/future-licence-to-prosper-key-to-unlock-mining-sustainability Baghai, M., Coley, S., & White, D., 1999, The Alchemy of Growth: Kickstarting and sustaining growth in your company, Orion Business Books, London, UK, 250p Cliff, D., Harris, J., & Bofinger, C., 2016, Ensuring health and safety through the entire mining cycle, The AusIMM Bulletin, August: https://www.ausimmbulletin.com/feature/ensuring-health-and-safety-through-the-entire- mining-cycle/ Greenwood, K., 2016, Practicing the Art of Innovation, Critical Essay, Strategic Management of Resource Companies, The University of Western Australia Porter, M.E., & Kramer, M.R., 2011, Creating shared value, Harvard Business Review, 89, (1/2), p62-77 Ramirez, R. & Wilkinson, A. 2016, Strategic Reframing: The Oxford Scenario Planning Approach, Oxford University Press, Oxford, UK, 272p Sykes, J.P., & Trench, A., 2014, Chapter 14: Finding the copper mine of the 21st century: Conceptual exploration targeting for hypothetical copper reserves, in Special Publication Number 18: Building exploration capability for the 21st century, (eds., K.D. Kelley & H.C. Golden), Society of Economic Geologists, Littleton, CO, p273-300 Sykes, J.P., & Trench, A., 2016, Using scenarios to investigate the long-term future of copper mining and guide exploration targeting strategies, International Mine Management Conference, Brisbane, QLD, 22-24 August, p265-289 Sykes, J.P., Trench, A., McCuaig, T.C., Craske, T., Dwyer, J., Subramaniam, N., Sullivan, S.T.M., & Turner, W., 2016a, Transforming the future of minerals exploration, AusIMM New Zealand Branch Conference, Wellington, New Zealand, 3-6 September, p407-418 Sykes, J.P., Wright, J.P., & Trench, A., 2016b, Discovery, supply and demand: From Metals of Antiquity to critical metals, Applied Earth Science, 125, (1), p3-20 Sykes, J.P., Trench, A., Wright, J.P., Davies, R.S., & Dixon, A., 2017, The energy transition: A mining and exploration industry perspective, World Renewable Energy Congress XVI, Perth, WA, 5-9 February. Sykes, J.P., Trench, A., McCuaig, T.C., & Jessell, M., 2017, Charles Dickens on the (potentially) changing role of globalization and sustainability in the long-term future of mining and exploration, Tenth International Mining Geology Conference, Hobart, TAS, 20-22 September, in press 9Trench, A., 2016, Towards big exploration, MiningNewsPremium.net, 11 January: http://www.miningnews.net/insight/strictly-boardroom/towards-big-exploration/ Wikipedia, 2016, Sydney Ferries, Wikipedia: https://en.wikipedia.org/wiki/Sydney_Ferries The challenge: Targeting ‘accessible’ and ‘economic’ mineral deposits What is accessibility? The problem: Predicting economics and accessibility is not possible Potential solution one: Adapt to the future as it emerges The problem: The industry may not be able to adapt to the future Potential solution two: Generate new ideas and open up new search spaces Potential new search space one: New commodities Future test: Are you competing on three horizons? Practical advice: Watch and listen Potential new search space two: Behind ‘socio-political’ barriers An example: ‘health & safety’ as a source of excellence & opportunity Potential new search space three: Behind ‘geopolitical’ barriers Tip: Politics is a playgroundSome ideas, so far Another problem: We may be unable to see the future, even if it’s here Getting ready to take on the challenge and see the future Discovered and economic but inaccessible Undiscovered and inaccessible but economic Discovered accessible but uneconomic Undiscovered uneconomic but accessible Geological certainty Economicviability Discovered accessible and economic (Behind) Discovered but inaccessible and uneconomic Undiscovered and inaccessible and uneconomic Undiscovered but accessible and economic Geological certainty Economicviability Discovered accessible reserve Scenario 1 Scenario 2 Scenario 3 Undiscovered accessible reserve Discovered Undiscovered Alice in Wonderland 1984 Discworld Now The Wardrobe “Trapped in a cycle” “Breaking the cycle” Localisation Globalisation EconomicValue SharedValue Important uses: economic demand Geopolitically restricted production Socio-politically restricted production 0 200 400 600 800 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Growth in market size indices of copper and aluminium 1900-2014 (1900 = 1) Cu Index Al Index For a mineral resource to become a mine, not only must a geological discovery be made, the deposit must also prove economically viable, and environmentally and socio-politically accessible (Sykes and Trench, 2014). The complex and uncertain factors associated with economics and access, however, means it is not possible to predict the nature of ‘undiscovered accessible reserves’. The Centre for Exploration Targeting ‘Future of Minerals Exploration’ scenarios programme was launched to investigate this issue. Access to mineral deposits can be restricted by either strategic considerations (geopolitics) i.e. when production is dominated by one or two countries / mines; or sustainability considerations (socio-politics) i.e. when production is restricted for environmental reasons or by local communities (Sykes et al., 2017). Scenario planning investigates multiple different options, rather than making one specific prediction (Ramirez & Wilkinson, 2016). Scenarios set one: aimed to develop a range of scenarios about the short- and long-term future of copper mining, then compared them to leading copper companies, mines and projects to determine how well the industry could adapt from the short- to long-term (Sykes and Trench, 2016). No copper company, mine or project is robust in both the short-term and long-term. This leaves the industry with two options: 1. Blend portfolios from the numerous brittle assets focusing on the ‘margin optimisation’ axis – a financial and economic approach; 2. Generate new ideas as to what a robust mine could be – focusing on the ‘idea space’ axis and thus the competencies of the industry. Mining industry thinking is generally asset and portfolio orientated so the scope for generating ‘new’ ideas this way is limited.Increased Decreased Long-term idea space generation Crusades Counting House Peasants’ Revolt Under Siege Short-termmarginoptimisation Increased Decreased Industry capabilities is a less developed area of thinking in mining so seemed more likely to be fruitful in developing new ideas. Scenario set two: generated a pathway to the long-term future, considering the whole mining industry and its capabilities (Sykes et al., 2017). Drawing from Baghai et al., (1999) to make it through the transition a company must: • Horizon 1: ‘Survive the present’; • Horizon 2: ‘Go through the transition’; • Horizon 3: ‘Thrive in the future’. To make it through the transition, two key capability sets at two corporate levels are required: • Working at a high-level with government and understanding major technological shifts; • Working on the ground with local communities and emerging innovators. Both ‘horizon scanning’ (Ramirez & Wilkinson, 2016) and ‘listening posts’ (Greenwood, 2016) are required. The former for the high-level; the latter for local level. An example for ‘breaking down socio-political barriers’ is the evolution of ‘health and safety’ (H&S) in the workplace, including mining. Originally H&S was treated in a ‘compliance’ manner with managers seeing it as a ‘barrier’ to profit (social licence is currently at this stage). H&S implementation was ineffective. Later, H&S became a ‘culture’ leading to effective implementation (Cliff et al., 2016). Eventually, companies like DuPont saw it as a source of ‘excellence’ and competitive advantage. Turning ‘social licence’ into an ‘excellence’ could open up opportunities for explorers, via access to new areas. Scenario set four: sought to bring together the findings of all the workshops (Sykes et al., in press). The final scenarios were based on two socio- economic axes: 1. Economic value versus shared value (Porter and Kramer 2011); 2. Globalisation versus localisation. Adapting to the future may prove very challenging. It is likely that some radically new ideas are required, as suggested in the previous section. However, these ideas may require very different skillsets and people to those currently present in the industry. As such, it is plausible that the industry is currently not capable of seeing the future, even if it wants to and it is already here. A parable: Sydney Ferries was once the world’s largest ferry company, but it literally failed to see the future being built above it: in the shape of the Sydney Harbour Bridge. (Wikipedia, 2016). One new search space could be new commodities. Many minor metals are currently ‘geopolitically’ restricted in production, yet seem critical for a ‘sustainable’ future as they are used in batteries, renewable energy, hybrid cars etc. This has happened in the past: Aluminium was a minor metal in the 19th century, but is now a major commodity market (Sykes et al., 2016a). One of the common problems in the mining sector is ‘generating ideas not businesses’ (left) where long- term thinking is not linked to business practice. Scenario set three: considered how to build industry reputation and break-down socio-political barriers (Sykes et al., 2016b). In one scenario (‘Hunger Games’) explorers focus only ‘commercial licence to operate’ (Andrews et al., 2016), or ‘small exploration’ i.e. just finding mineral deposits. In the other scenario (‘Star Trek’) explorers pursue both commercial and ‘social licence to operate’ or ‘big exploration’ (Trench, 2016) i.e. also working with innovators and communities. Strategists tend to overreact to the short-term in politics – the ‘swings’ back and forth between political parties that are inevitable in a democracy, thus something we should remain strategically neutral about. Over time politics undergoes gradual shifts, which affect all parties (‘roundabouts’) – we may currently be seeing this with increased ‘localism’ in politics. We need to adapt to these over the long-term. Finally, there are ‘climbing frames’ – inevitable, unmovable parts of the future. A focus on sustainability seems to be part of the future – it must be tackled. The initial findings of this research project are: • That it is unlikely we can adapt the current mining industry and its assets to a long-term future that is too different. Explorers need to generate some new ideas to transition to this future, such as: • Focusing on new commodities associated with a different long-term future; • Developing a better ‘social licence’ so that we can overcome socio-political barriers to entry; • Being more cognisant of political trends and overcoming geopolitical barriers to entry. Minerals explorers will need to make some changes to be able to see what a future economically viable, and environmentally and socio-politically accessible resource will look like. These include: • Developing strategies and capabilities to effectively enter emerging commodity markets; • Building a diverse exploration culture to bring in ideas from other industries and disciplines; • Encouraging creativity and ideation; • Linking short and long-term thinking; • Monitoring local and global socio-political, economic and technological trends; • Measuring and understanding the potential impact of these trends. Maybe then we can take on the challenge… Images: York Notes Images: Google Play & Memory Alpha Images: Flavorwire, Obey Giant, TV Tropes & Terry Pratchett Books

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