A trip to South Korea in the last fortnight saw your scribe boning up on the literature surrounding exploration management best practice, of which unfortunately there is precious little.

The job at hand was to run a week-long course on the nuances of the subject.

Thankfully, having attended a similar course in Perth recently, I knew some of the right questions to pose for discussion – and even some of the answers too.

Participants at the course hailed from an impressive list of countries, with their travels having taken them to even more exotic locations than their nations of origin.

The classroom had representatives from Mongolia, Laos, Vietnam, Turkey, Cambodia, Indonesia, Malaysia, Peru, Myanmar, Cameroon, the DRC, the Philippines, Uzbekistan and, of course, South Korea.

Inevitably in such gatherings, a brief exam is required to close out the course and as a formal rite of passage.

Of course, there are never precise, perfectly correct answers in the exploration world but no doubt some answers to the questions below are better than others.

For any Strictly Boardroom exploration gurus, here is a selected sample of the test questions – with the suggested correct answers at the end of the article.

Your scribe is interested to know if anyone gets all questions correct – and whether you agree with the answers.

1. How should a company allocate its exploration budget between greenfields and brownfields exploration?

a) 80% greenfields; b) 80% brownfields; c) 60% brownfields, 40% greenfields; d) 60% greenfields, 40% brownfields; e) 50:50 brownfields and greenfields; or f) it depends on the reserve position at each of the company’s mines.

2. An exploration program is thought to have a 1% probability of discovering a $100 million net present value deposit and will cost $500,000 to complete – what is the undiscounted expected monetary value of the exploration program based simply upon these assumptions if no other outcomes are possible?

a) ~$1 million; b) ~$500,000; c) zero; or d) minus $500,000.

3. In 2010 a company has $200 million in revenues, $50 million profits and spends $10 million on exploration. In 2011 the same company has $300 million revenues, $100 million profits and spends $12 million on exploration. The managing director says the increased spend on exploration shows the company’s commitment to growth by exploration. Is he justified in making the statement? a) Yes; or b) no.

4. A company has one advanced exploration project at resource delineation stage and one early-stage greenfields exploration project. To balance the exploration portfolio, should the priority of the company be to increase a) the number of advanced-stage projects; or b) the number of greenfields projects?

5. Corporate risk decreases as a company moves from exploration to advanced exploration through to project financing and finally through to project construction and commissioning. Indicate whether this statement is true or false.

6. Technical risk in exploration decreases as a company advances from regional exploration to prospect evaluation to resource/reserve delineation. Indicate whether this statement is true or false.

7. The following new dimensions can increase the exploration “search space”. Answer true or false: a) new geography for exploration search; b) drilling deeper; c) introducing an effective new geophysical technology into exploration; and d) higher metal prices.

8. Does drilling spend comprise more (in percentage terms) of the annual exploration budget typically for a) brownfields (near-mine, many previous discoveries); or for b) greenfields (new area, no previous discovery) exploration?

9. Which of the following are “convex” metals (meaning that significant value accretion is conferred by the market upon initial mineral discovery) as opposed to “concave” minerals (where significant value accretion typically awaits proof of development concept and mineral marketing)?

a) copper; b) gold; c) iron ore (hematite); d) iron ore (magnetite); e) niobium; f) tungsten;

g) nickel (sulphide); h) nickel (laterite); and i) bauxite.

How did you do?

Perhaps more critically, can you suggest better questions that might guide mineral explorers from developing countries (and at least one explorer from Australia too)?

Good Hunting.

Allan Trench is a Professor of Mineral Economics at Curtin Graduate School of Business and Professor (Value & Risk) at the Centre for Exploration Targeting, University of Western Australia, a non-executive director of several resource sector companies and the Perth representative for CRU Strategies, a division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).

Suggested answers to the quiz: 1 – f (it depends on the reserve position); 2 – b (~$0.5 million); 3 – b (no); 4 – b (add more greenfields projects); 5 – false (corporate risk increases not decreases); 6 – true (technical risk decreases); 7 – all are true; 8 – a (the percentage drilling spend is higher for brownfields exploration); and 9 – a, b, c and g are “normally” convex; d, e, f, h and i are “normally” concave.