Looking for the improbable needle in a haystack: the economics of base metal exploration in Canada

CIM Bulletin, Vol. 74, No. 829, 1981

BRIAN W. MACKENZIE, Professor of Geological Sciences, and Research Associate, Centre for Resource Studies, Queen's University, Kingston, Ontario

This paper briefly outlines the characteristics which should be considered in assessing the economics of mineral exploration, and illustrates such an assessment by using data from the Canadian base metal sector. Implications for the sector are found to include the following: base metal exploration has the potential to create a substantial amount of new wealth;  investment incentive for exploration under current conditions is not unattractive over-all; because of existing taxation policies, there is much more incentive for large companies to explore than for smaller enterprises; succesful exploration is sensitive to the size, financial resources and organizational structure of the exploration entity: the general level of recent exploration expenditures should be adequate to maintain the current rate of production and perhaps to support very modest growth; and  there is an important opportunity for growth in the sector. The findings of the study suggest that government policies should be made more flexible, in order to take into account the risks associated with exploration and with price fluctuations in the base metal sector. Recommendations are also made concerning improvements in provincial regulations for disclosure of exploration information.

Keywords: Mineral economics, Exploration, Base metal exploration, Investment, Taxation, Value, Budgets, Government policy, Information exchange.