Hronsky - Session 5 - Human Aspects of Mineral Exploration

Module 3:
Exploration Management and Targeting
Session 5:
Human Aspects of Mineral Exploration
Jon Hronsky
21-25 March 2011
KIGAM International School for Geoscience Resources March 2011 1
Characteristics of People in
Geosciences and How They Work
1
Overview
Introduction
I t d ti
Creativity, innovation and pattern recognition
Decision making under uncertainty
Escalation of commitment
Synthesizing exploration data into predictive outputs
Career paths and rewards for technical people
Building and retaining a high- quality team
Introduction
Mineral Exploration, like any business,

ultimately depends on the activities and
decisions of the individuals
This module focuses on work issues at the

individual level
Several key aspects are critical to exploration

success
2
Creativity, Innovation
and Pattern Recognition
IDENTIFYING AND USING THE
CREATIVE INNOVATORS
3
7
Context
Exploration
p is not a linear business
Inputs of work and effort do not correlate

closely with the outputs of business results
Instead, discontinuities related to creative

insights
g and/or technical innovation are veryy
important
It is important to recognize that some people

will be consistently better at this than others
4
Distinctive Aspects of Geology as a Science
(Justin Osborne, 2007)
Incorporation of physical sciences to a spatial context

The addition of the 4th Dimension
Dimension, Time,
Time is a unique complication
Geology is complicated by the 4D associations
The extreme spatial awareness and understanding requires a unique skill
set
Many data types are utilised, varied and differing quality
Much of Geology remains purely interpretative, concepts not proved
Detailed scientific processes are interpreted from ideas and minimal data
Interpretation often requires many artistic qualities in a geologist
The scientific method of geologists is to collect information, stare at it, try

a lot of different assumptions, read and discuss other people's papers and
grope their way toward greater certainty, or at least figure the answers with
the best odds. This is more like the real problems of real life where much is
unknown
KIGAM and
International variable
School for Geoscience Resources March 2011 9
Intuition in Geology
(Justin Osborne, 2007)
Geologists typically employ finely developed intuitive skills, a high-speed

variety of logic which compares and contrasts patterns of data. This skill
matures continually with use
So facile is our capacity to assemble multi-dimensional models that we do

not require continuous data to form them. We mentally fill in gaps, making
an intuitive leap toward a working model the instant we have enough data to
perceive even the most rudimentary pattern within the data suite.
An engineer by contrast thinks in a linear mode

mode, rather like a cog railway
railway,
and must have his data in a set sequence in order to process it through a set
formula. We often have trouble with engineers. We find them hopelessly
rigid, while they find us hopelessly protean, and perhaps hallucinatory
Sarah Andrews, Spatial Thinking with a difference

AEG News, vol 45, no. 4
5
Exploration Geologists:
Typical Characteristics and Talents
(Osborne, 2007)
Ability to seek orientation in space and time
Strong pattern matching skills
Intuitive able to rely on, and utilise intuition in interpretation

A hallmark of intuition is that it functions in leaps rather then by neatly ratcheting
intervals
Natural experts at grappling with ambiguity
Comfortable with questioning authority

Continually challenge concepts and norms to advance working hypotheses
Struggle to comprehend linear thinkers

Sarah Andrews, Spatial Thinking with a
Well honed scientific understanding difference
AEG News, vol 45, no. 4
Cognitive Development of Exploration

Geoscientists (Osborne, 2007)
how a person perceives, thinks, and gains understanding of his or her world
through the interaction of genetic and learned factors
Geologists develop skills and ability with time / experience
Strong influences from external sources, mentors
Inherent ability is a major controlling factor
Individuals mind - set a critical control on development

p
Either specialise or diversify with time
Interpretive skills develop and evolve
Individuals will develop their own style
6
Decision-Making Under
Uncertainty
UNDERSTANDING THE
HEURISTICS
Introduction
Decision- making under (high) uncertainty

Distinctive aspect of mineral exploration
Well documented that human intuitive judgment does not perform

well in these conditions
Heuristics and Biases
Critical that an Exploration Manager understands how these affect

judgments (of both geoscientists and managers)
Much of the material in this section is derived from a Macquarie

University research project (2004-2005) led by Mike Etheridge:
Improving Mineral Exploration Performance by Superior Management
of Risk, Uncertainty and Value
7
Macquarie Univ. Survey
A survey of a representative range of mineral

exploration industry professionals was completed as
part of a Macquarie University (MU) project
(Etheridge, 2008)
Two Parts:
Standard psychometric tests to determine individuals
decision-making style and attitude to risk
Three exploration scenarios, to assess decision
making
MU Survey Principal Outcomes
1
1. Probabilities of discovery assigned in scenarios ranged over
more than two orders of magnitude, irrespective of information
provided
2. Mean probability of success for each scenario was higher than
known average industry base rates
3. Good correlation between psychometric measures of rationality
and the assignment of lower probabilities of success
4. Proposed cash payments for exploration projects significantly
undervalued the opportunity
opportunity, given own assessments of
discovery value and probability (an expected bias see Utility
Theory discussion)
5. When faced with exploration failure following initial success,
there was a significant bias to continue exploring despite having
limited funds (escalation of commitment)
8
Implications for Exploration
Management
Staff are likely to have an optimistic bias; this is probably

functional and should not be discouraged, but
Intuitive judgments must be calibrated with quantitative analysis

for the group to have a realistic idea of what it might deliver
The risk - discounting behaviour associated with purchasing

early-stage exploration projects may be inappropriate in a large
organization and neutralize a potential competitive advantage
Management need to guard against overspending (escalation of

commitment) if follow-up results do not match early
encouragement
Two Cognitive Systems
System 1 System 2
9
Two-System View of
Decision-Making
Proposed by James in late 19th Century and developed more

recently by Kahneman & Tversky (1979)
A model that describes how we use two types of cognitive
processes to make a judgment or come to a decision: Intuition
(System 1) and Reason (System 2)
System 1 (Intuition):
fast and automatic (involuntary)
difficult to control and / or modify
based on unconscious heuristics which may lead to biases
System 2 (reason):
slower, serial and effortful
deliberately controlled
more flexible and can be based on rules
How the Two Systems Interact
One of the roles of System 2 is to monitor the quality of our

intuitive judgments
However this monitoring is generally lax; means that many of

our intuitive judgments are incorrect
When problems increase in complexity, we tend to resort to

System 1:
This is often the case for exploration-related decision-making
10
Source: Monica Anderson- web presentation on Artificial Intuition
21
Implications for Exploration

Management
Need to accept that most important decision-making

decision making
(e.g. project ranking) will have a strong tendency to
be dominated by System 1 cognitive processes
Make sure that System 2 processes are used as

much as possible to calibrate and monitor System 1
thinking
e.g. use of quantitative modeling of exploration
process
Make sure that the inherent biases in System 1

cognition are well-understood and transparent
11
Our Intuition can be biased!
Parallel or not?
Heuristics and Biases
An automatic, non-conscious process that influences

judgments and decision
decision-making
making (Kahneman & Tversky
definition)
A rule of thumb or a shortcut used to reduce amount of

information processing we do
Complex tasks, e.g., assessing probabilities and

predicting, are reduced to simpler operations of judgment /
intuition
Heuristics are highly economical and mostly effective but

sometimes they bias our perceptions and result in errors of
judgment
When these errors occur, they are severe and systematic
12
Important Heuristics in Mineral
Exploration
Representativeness heuristic
Neglect of Base Rate
Misconceptions of chance
Overconfidence
Availability heuristic
Anchoring heuristic
Loss / Gain Asymmetry
Representativeness Heuristic
13
Representativeness Heuristic(1)
Assumption of commonality between objects of similar

appearance, or between
b t an object
bj t and
d a group it appears to
t fit
into
For example, people tend to judge the probability of an event

by finding a comparable known event and assuming that the
probabilities will be similar
As a part of creating meaning from what we experience, we

need to classify things.
things If something does not fit exactly into a
known category, we will approximate with the nearest class
available
May lead to errors in assuming that similarity in one aspect

leads to similarity in other aspects
Representativeness Heuristic (2)
The representativeness heuristic leads to three

biases that are particularly relevant to mineral
exploration:
Neglect of base rate
Overconfidence
14
Neglect of Base Rate
The Base Rate is how often, on average, what we are looking for
actually
t ll occurs in
i the
th instances
i t we examine
i
Mineral exploration has a low base rate; what we are testing for (an
ore deposit) is only rarely present in the population that we are
testing (targets)
Intuitive judgement in humans has been shown to be generally poor
in Low Base Rate situations
g
We tend to neglect the base rate when making
g our intuitive System
y 1
judgments (previous sections)
We assume that because our anomaly looks like one associated with
a known deposit it is also likely to be a deposit
Important we understand the quantitative implications of the low
base rate
30
15
This bias is that we expect that the essential

characteristics
h t i ti off the
th chance
h process willill occur (i.e.
(i
be represented) not only at a global level across an
entire sequence, but also at a local level in each part
of a sequence
Examples:
expect that random outcomes will not cluster
expectt th
thatt it is
i more likely
lik l to
t gett a head
h d on the
th
next toss after a long run of tails
Main practical consequence is that we will often tend

to interpret a cause that does not exist to explain
patterns in random data
Map of V1 Attacks on London
16
Overconfidence
When an object (or event) matches a stereotype we hold,

we are likely to express much more confidence in our
prediction that the object is a member of that category
This occurs even when the information we have about

the object is poor (limited, unreliable or out-dated)
Persists even when we are told of the factors that limit

the accuracy of our prediction
Practical consequences in mineral exploration relate to

missing the significance of new information and hence
opportunities:
this belt is unprospective because it looks like
34
17
Overconfidence and Expertise
O
Overconfidence
erconfidence increases with
ith knowledge:
kno ledge
Those who know less have a lower level of
overconfidence
As our knowledge increases, the accuracy of our
answers increases, and so does our
overconfidence
Our overconfidence increases at a faster rate than
our accuracy
Need to remember overconfidence will be greatest in

our area of strongest expertise!
Improving Expert Judgment with

Calibration
Hubbard (2009)
18
Availability Heuristic
How many
dolphins are
there in this
picture?
Availability Heuristic
Reflects influence of the relative availability of objects and events

in memory on decision
decision-making
making
We tend to base decisions on information that is readily available in

memory. Information is likely to be readily available when:
An event has occurred recently
Something is salient or prominent
An event evokes strong emotion
There is no reason to believe that the information which is most

accessible is also what is most relevant to making a good decision
In mineral exploration, a recent high profile discovery and the

factors perceived as relating to it may have a disproportionately
high impact on our decision-making because of the availability
heuristic
19
Anchoring Heuristic
Refers to the fact that when we make an uncertain or unclear

decision, we make estimates by starting from an initial value
(anchor) which we then work with and adjust until we reach
our answer
Typically, the adjustments we make are insufficient
Anchors are determined by:
The formulation of the problem
A partial computation
Purely arbitrarily; e.g. the opening bid in a commercial
transaction
Different starting points lead to different estimates, but all

estimates are biased towards their starting points
May lead to dramatic under-estimation of the value (or the
risk) of something
The Power of Anchoring:

An Example
Graduate Students at MIT Business School asked to first

write down last two digits of their social security numbers
Then asked to bid for a cordless key board
Students whose numbers ended in 80-99 bid on average
$56
Students whose numbers ended in 1-20 bid on average
$16
Anchoring results in 300% difference in outcome!
Research by Dan Ariely, reported in Lehrer (2009)
20
Loss/Gain Asymmetry
One of the most important discoveries of Kahneman and Tversky

is that we judge the threat of a loss to be greater than the
promise of a gain of the same size
There are fundamental evolutionary biological reasons for this

and similar behaviours have now also been observed in non-
human animals
It is the basic reason for the risk discounting we observe in

market valuation of exploration opportunities
When choosing between a sure gain and a substantial
probability of a larger gain,
gain were less likely to take the risk
Not just about risk discounting however!
When choosing between a sure loss and a substantial

probability of a larger loss, were more likely to take the risk of a
larger loss
Which would you choose?
Sure gain of $80

or
85% chance of winning $100 and a 15%
chance of winning nothing
21
Most people will choose the $80. We will be risk
averse. We
W will
ill choose
h the
th $80 even th
thoughh the
th
expected monetary value is greater for the risky
option:
If this gamble were repeated many times,

the average gain would be about $85 per
game ($100 x .85 + $0 x .15 = $85)
We choose $80 x 1.00 = $80
Which would you choose?
Sure loss of $75

or
80% chance of losing $100 and a 20%
chance
h off losing
l i nothing
hi
22
The Power of Framing:
A Famous Example
(Kahneman & Tversky, 1981)
Two groups of medical doctors were asked to chose the
preferred treatment program
p p g for a group
g p of 600 patients
p
from two options.
Group 1 had to chose between: 72% prefer Program A!
Program A: If adopted 200 people will be saved
Program B: If adopted, a one-third probability that 600
people will be saved and a two-thirds probability that no
one will be saved
Group 2 had to chose between: 78% prefer Program B!

Program A: If adopted 400 people will die
Program B: If adopted, a one-third probability that no-one
will die and a two-thirds probability that 600 people will die.
Relevance to Mineral Exploration
This behaviour can lead to an inherent

conservatism that can result in us missing critical
opportunities because we are more focused on the
potential loss of investment than the potential gain
In many situations, exploration can only deliver its

objectives if it is exposed to appropriate high risk
projects
It also explains Escalation of Commitment

behaviour (discussed below)
23
Managing the Effect of Heuristics
and Biases
Calibrate with quantitative analysis where possible

Be aware and vigilant about these effects
Be aware that vigilance is likely to be impaired by:
Time pressures
Undertaking different tasks simultaneously
Being
B i iin a good
d mood
d
Boom times and the periods immediately after a
major new discovery are particularly high risk !
Escalation of Commitment
24
Escalation of Commitment
When we are unwilling to change our course of action

even when the evidence increasingly
g y points
p to our
decision being incorrect
Our commitment to the course of action may lead us to

invest even more, despite the evidence
Examples in Mineral Exploration include

Exploring individual projects too long
P
Pursuing
i lower
l priority
i it targets
t t after
ft high
hi h priority
i it targets
t t
have failed
Perseverance in the face of negative results
This is a very important behavior for a Senior

Exploration Manager to be aware of and to manage
Escalation of Commitment - Causes
Escalation of commitment can occur when:

we have already invested substantially
(time/money/effort) in the program
it is difficult (cost, loss of face) to reverse the initial
investment decision
we feel a strong personal sense of responsibility
for the decision
25
Managing the Escalation of
Commitment Problem
Define clear goals and milestones
Regular project review by independent peers without

emotional commitment to project essential; particularly at
major milestones
Resist project scope creep

but must be able to distinguish this from genuinely important
new information (i.e. gold anomaly in a nickel target)
Provide frequent and specific feedback about performance

reward early exit from and turnover of projects
Develop organizational culture that understands value of

decisions to stop at the right time
but not at the expense of encouraging superficial exploration
Synthesizing Exploration Data Into

P di ti Outputs
Predictive O t t
26
Introduction
A core task of exploration geoscientists is to interact

with multiple spatial datasets to produce an
integrated synthesis
The purpose of this synthesis is to enable the

prediction of undiscovered mineralization
They include:
Geological cross-sections
cross sections
3D models
Geological plans
Exploration targeting summary plans
A Core Competency
The construction of these syntheses requires the ability to both interpolate

b t
between, and
d extrapolate
t l t ffrom, li
limited
it d data
d t points
i t
They are interpretative products that while honoring the available data must
also incorporate judgment and intuition
The geoscientist must be able to construct a mental model of their project,

either in 3D or in 2D but extended under cover
This requires a reasonable facility for abstract thought and creativity
Some individuals with strongly linear and very concrete thought processes
fail to demonstrate basic competency in production of these syntheses
This will significantly limit their effectiveness as explorers
In contrast, strong skills in this area are an important success ingredient
27
The Critical Role of
Pencil and Paper
Traditionally, the production of hand-drawn maps and sections

played
p y a critical role in the production
p of geological
g g syntheses
y
This has become less common with the era of GIS, 3D

computer models and visualization
However, it is our experience that there remains a strong link

between individuals who hand-draw plans and sections, and
exploration success
Th suggested
The d reason may relate
l to some recent advances
d in
i
cognitive psychology
There is increasing evidence emerging of a link between tool

use and cognition:
Using our hands helps us learn!
28
Career Paths and Rewards for
Technical Staff
Context
A successful mineral exploration group depends on the skills

and expertise of its technical people
Many of the required skills take many years to fully mature
Need to avoid the common scenario in many modern

organizations where talented technical people are streamed into
non-technical management as soon as they are identified
Management career- path assumed to be only way to get
ahead
This results in the most important technical work in the

organization generally being carried out by relatively
inexperienced staff
Organization must provide a non-managerial career path that

recognizes and rewards technical people as their value to the
organization increases
29
Context (cont.)
It is often assumed that managers are hard to

replace but excellent technical people can be
found in abundance. But this is not reality!
Excellence in mineral exploration requires people with

special talents / abilities
A goodd explorationist
l ti i t improves
i as skills
kill and
d experience
i
build over time
Technical Career Paths
Need to link reward / recognition of the individual

to corporate value growth
NOT just recognition of time served
Model proposed on next slide
Note that promotion in a technical career path will

tend to be a lag indicator of performance (i.e.
recognition of contribution) whereas promotion in a
managerial career path tends to be a lead indicator
of performance (i.e. recognition of potential)
KIGAM 60
SeniorInternational
ExplorationSchoolManagement
for Geoscience Resources
Course March 2011
February
30
Technical Career Path
(Proposed Model)
Innovation with strategic impact
Technical communication/
mentoring across organisation
Accountability for major
High
High quality Data continuous improvement programs
Collection and Technical functional leadership
interpretation (e.g. Chief Geophysicist)
Effective application of
technical concepts in
operational context
Significant innovation
Impact on skills/
productivity of other
technical staff
Effective influence on
management decision-making
Significant mentoring
skills
LEVEL 1 LEVEL 2 LEVEL 3

REWARD LEVEL
61
31
Building and Retaining a High-
Quality Team
Overview
It has been 40+ years since the McKinsey study of the

keys to successful mineral exploration management
Experience since that study has confirmed
Management style and people development are key to
attracting and retaining good people
The importance of senior managers striving to identify
b h i
behaviors th
thatt correlate
l t with
ith success
A senior exploration manager should spend a very
significant amount of time engaged with attraction and
retention of people
32
Management Style
Considerations:
Create a small organization character within larger organization
Clear and regular communication is key
Actively support development of new ideas
Demand scientific rigor and excellence
Encourage
E risk-taking,
i k t ki but
b t in
i the
th context
t t off agreed
d process
Utilize decision-point based project management
Think of the budget as an opportunity creator as much as a

control device
People Development
Focus on recruiting high caliber geoscientists -

this takes time to do well
Practice rigorous performance management
Emphasize training and development
33
Recruitment
Recruitment
Many senior exploration managers leave recruiting in the

hands of HR
HR is trained to help; however it typically has a poor

understanding of the particular needs of Exploration
Senior managers need to engage in the recruitment process;

they are in the best position to assess overall capability and
balance within the team
Remember, as senior manager you are ultimately

accountable for results; and results (or lack thereof) will be
attributable to the quality of your team
34
Excellent People
Recruitment what attributes did WMC look for ?
Solid academics
Passion and commitment
Intense curiosity
Drive to succeed
Finding and retaining people with these attributes is hard work
Suchomel, 2006
69
Performance Management:
Position Description
Every Exploration employee has a position description that

Is written and agreed by the employee
Makes accountabilities and authorities clear
Is approved by the senior manager
If the position description includes accountabilities outside

of Exploration, this should be documented and also
approved by the senior manager in the outside area or
department (this is sometimes referred to as a Service-Level
Agreement)
35
Objective Setting
Each Exploration employee should develop annual written

work objectives that include target deliverables and dates as
well as training if needed
Annual Objectives should be consistent with the Exploration
Business Plan and should support the Annual Plan
Objectives reviewed and agreed with manager
Updated during the year if warranted in response to business

condition changes
Performance Review
36
Performance Review
A detailed performance review based on agreed

objectives should be conducted annually for every
employee
Less formal review should occur more often to minimize

misunderstanding and surprise
A standard evaluation system, that applies across the

organization, should be developed and communicated to
all staff prior to commencement of a performance period
Individual Development
Every Exploration employee should have an individual

development plan, documented either as part of annual
objectives or as a separate plan
Critical to building knowledge and capability in the organization
Requires commitment from senior exploration manager

37
Excellent People
Competency and capability
Commitment to continuous learning
Individual training plans
Study leave options
Geoscientist rotation between mine operations, mine-area exploration, and

global exploration was a very beneficial strategy for WMC
Suchomel, 2006
75
Let none of us forget that ore deposits are

first found in the mind: humble minds,
minds thirsting for new knowledge and new
understanding, minds not afraid to embark
on adventures in new ways of thinking
Roy Woodall, Sept. 2004
38
39

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Module 3:

Exploration Management and Targeting

KIGAM International School for Geoscience Resources March 2011 1

KIGAM International School for Geoscience Resources March 2011 2

KIGAM International School for Geoscience Resources March 2011 3

Mineral Exploration, like any business,

This module focuses on work issues at the

Several key aspects are critical to exploration

KIGAM International School for Geoscience Resources March 2011 4

KIGAM International School for Geoscience Resources March 2011 5

Inputs of work and effort do not correlate

Instead, discontinuities related to creative

It is important to recognize that some people

KIGAM International School for Geoscience Resources March 2011 8

Incorporation of physical sciences to a spatial context

The scientific method of geologists is to collect information, stare at it, try

Geologists typically employ finely developed intuitive skills, a high-speed

So facile is our capacity to assemble multi-dimensional models that we do

An engineer by contrast thinks in a linear mode

Sarah Andrews, Spatial Thinking with a difference

KIGAM International School for Geoscience Resources March 2011 10

Ability to seek orientation in space and time

Strong pattern matching skills

Intuitive able to rely on, and utilise intuition in interpretation

Natural experts at grappling with ambiguity

Comfortable with questioning authority

Struggle to comprehend linear thinkers

KIGAM International School for Geoscience Resources March 2011 11

Cognitive Development of Exploration

through the interaction of genetic and learned factors

Geologists develop skills and ability with time / experience

Strong influences from external sources, mentors

Inherent ability is a major controlling factor

Individuals mind - set a critical control on development

Either specialise or diversify with time

Interpretive skills develop and evolve

Individuals will develop their own style

KIGAM International School for Geoscience Resources March 2011 12

KIGAM International School for Geoscience Resources March 2011 13

Decision- making under (high) uncertainty

Well documented that human intuitive judgment does not perform

Heuristics and Biases

Critical that an Exploration Manager understands how these affect

Much of the material in this section is derived from a Macquarie

KIGAM International School for Geoscience Resources March 2011 14

A survey of a representative range of mineral

KIGAM International School for Geoscience Resources March 2011 15

MU Survey Principal Outcomes

KIGAM International School for Geoscience Resources March 2011 16

Staff are likely to have an optimistic bias; this is probably

Intuitive judgments must be calibrated with quantitative analysis

The risk - discounting behaviour associated with purchasing

Management need to guard against overspending (escalation of

KIGAM International School for Geoscience Resources March 2011 17

Two Cognitive Systems

KIGAM International School for Geoscience Resources March 2011 18

Proposed by James in late 19th Century and developed more

KIGAM International School for Geoscience Resources March 2011 19

How the Two Systems Interact

One of the roles of System 2 is to monitor the quality of our

However this monitoring is generally lax; means that many of

When problems increase in complexity, we tend to resort to

KIGAM International School for Geoscience Resources March 2011 20