Assessing The Exploration Risk

Randy Arion Duke (12112030)

Diajeng Larasati (12112038)
Hifdzul Fikri (12112058)
Introduction
The techniques for assessing the
exploration risk were developed mostly
by the oil industry and are regularly used
there
The probability factors are considerably
less precise in metal exploration risk is in
most cases extremely doubtful
However, in spite of the above, some
methods for assessing the exploration
risk will briefly described
The Expected Monetary Value (EMV) Method

The EMV method is regularly

applied in the oil industry for
decision-making
The EMV Method essentially
compares the monetary reward
weighted by the probability of
success, with the expenditure of
risk capital weighted by the
chance of failure
The EMV Method

If P = Success, then:
Q (Failure) = 1 P

With : B = Risk Reward

Ri = Risk Capital
The Expected Value Of Each
Discovery
The overall probability of
success, Pg, can be subdivided
into three separate probabilities:
P , of a deposit occurring
within the exploration area
P , of discovering the deposit
P , of the economic value
The Expected Value Of Each
Discovery
If Pg = the probability of an economic
success, then:

Then, expected value per discovery is:

With B = NPV of an economic discovery

and C = the cost per economic discovery
 Calculating the Exploration Success by the Law of Gamblers
Ruin

The
rule of gambling theory that is
used in exploration for the calculation
of probabilities of success, Pe, is the
law of gamblers ruin:

Ps = the probability of success of a

single exploration project
n = the number of exploration project
 Calculating the Exploration Success by the Law of Gamblers
Ruin

Equation
, is suitable for
calculating how many trials
must be made in order to
achieve a certain minimum
probability.
Each of the trials must be
scientifically well based, or
otherwise the value for the
probability of success, Ps, of
 Calculating the Exploration Success by the Law of Gamblers
Ruin

If the
probability of success is to
be greater, and approach
certainty with, for example, an
overall probability of success of
90% (Pe = 0.9), then the number
of test that would be necessary
are again derived from equation:
Calculation of the Minimum Exploration Budget

If
there are n exploration project and
the probability of a total failure is
therefore (1 - Ps). Alternatively, the
probability of making at least one
discovery is:

If Amin is the minimum exploration

budget, and C is the average cost of
a project, then:
Calculation of the Minimum Exploration Budget

Subtituing
for n in equation ,
then:
Assessing Various Exploration
Alternatives
Application In Mineral Exploration

Very few reliable probability

factor, mostly subjective
One method can applied in
another exploration to make
relative approach
Application In Mineral Exploration
At the start of a base metal exploration
program, an interesting airborne anomaly
is identified on the ground, and is
surveyed with ground magnetic. The
question of undertaking an additional IP
survey is now raised. The drilling cost
(including mobilization) = $15000, IP
survey cost = $10000. The net expected
value of the discovery = $20 million, the
probability of succes = 0,01
Application In Mineral Exploration

EW = expectancy value
P = -15000
AC= probability without
+ p.NPVl using IP+
= -15000
0,01.20.10
P2 = probability using IP
AC=-15000 + 200000 = 185000

Merubah probabilitas jika

menggunakan survey IP
AB=-15000 - 10000 + P2.20000000
 Application In Mineral Exploration

EWAB=EWAC
185000 = -25000 + P2.20000000
P A0,0105
2 = t = factor of merit
P2 = 1,05%, P = 1%
Pe =probability of discovery
Kmemilih
Jika e = cost of discovery
menggunakan IP survey
seharusnya probabilitas bertambah minimal 5%
Jadi dibandingkan menggunakan IP survey dan
satu lubang drilling, lebih baik drilling dua kali
drill karena biaya mobilisasi hanya dibayarkan
sekali
Slitchers method
Daftar Pustaka

Wellmer, Wilhelm and

Friedrich.1998. Statistical
Evaluations in Exploration for
Mineral
Deposits.Jerman:Springer