Interesting article from Mining News re Fraser Range explorers -...

Interesting article from Mining News re Fraser Range explorers - a bit sobering with the bottom line that over $100m has been spent on further exploration since Nova and littlen of note found

On the efficiency of Fraser Range exploration
Tuesday, 7 April 2015


THIS week Allan Trench is joined by Rob Murdoch to take a look at the exploration spend in the Fraser Range – finding that around 65% of funds on average goes in-ground.



Strictly Boardroom this week takes a quick look at the exploration hot-spot that is the Fraser Range with the help of 2014 company-reported cash flow data collated by Rob Murdoch, director of Austex Mining.


The Fraser Range region of Western Australia has hit the headlines following the discovery of the Nova-Bollinger nickel-copper deposit by Sirius Resources.


Uniquely, land tenure in the region is dominated by junior explorers – at least for now – such that the release of information on exploration progress is unsurpassed. Close to every rock-chip of potential interest is reported. Imagine the contrast if the area was held by majors in that little real-time exploration information would reach the public domain.


Taking advantage of this big-data opportunity that the ongoing exploration effort in the Fraser Range offers, here are some short-form takeaways as to progress in the area in terms of exploration spend reported from cash flow statements over calendar 2014 by explorers in the area.


Nothing is ever quite that simple of course, as many explorers in the Fraser Range are far from one-trick ponies, also spending funds elsewhere on other projects in their respective exploration portfolios. No easy adjustment of the data reported in company cash flow statements can be made to accommodate this fact: that forensic level of detail awaits another day.


That said the Fraser Range is likely to feature strongly as a prime target for exploration for the upwards of 20 ASX-listed explorers with material interests in the region. Here is a first-pass cut of those companies then – no doubt with potential omissions – so any readers from companies frustrated at being left out of the mix are invited to get in touch.


Alphabetically, the ASX companies excluding Sirius Resources, hoping to hit the big-time in the Fraser Range include:


1. Apollo Minerals

2. AusQuest Limited

3. Boadicea Resources

4. Buxton Resources

5. Caeneus Minerals

6. Classic Minerals

7. Dempsey Minerals

8. Enterprise Metals

9. Goldphyre Resources

10. Heron Resources

11. Legend Mining

12. Matsa Resources

13. Mining Projects Group

14. Mount Ridley Mines

15. Orion Gold

16. Pioneer Resources

17. Ram Resources

18. Red River Resources

19. Rumble Resources

20. Rutila Resources

21. Segue Resources

22. Sheffield Resources

23. Windward Resources


Looking at the activity, at least, in dollar terms (if not the exploration outcomes) that have been achieved to date in search of the next Nova: first to the big exploration spenders for calendar 2014, the top five companies in terms of funds reported as spent on exploration were: Rutila Resources ($4.8 million), Heron Resources ($4.6 million), Orion Gold ($4 million), Matsa Resources ($4 million) and Windward Resources ($3.5 million).


Next, and for completeness, the top five spenders on administration costs in 2014 were Rutila Resources ($4.8 million), Sheffield Resources ($3.7 million), Heron Resources ($2.6 million), Legend Mining ($1.8 million) and Matsa Resources ($1.8 million).


Then looking at the ratio administration costs as a fraction of the total company spend (here simply defined as exploration spend plus administration costs) as a high level measure of in-ground exploration efficiency. Excluding six companies who reported less than $500,000 of total exploration spend for 2014, where the small numbers can result in extreme ratios, the following ‘exploration efficiency league table’ results from this analysis.


Those companies with the lowest (through to the highest) relative administration costs measured as a proportion of total company expenditure were as follows:


1. Orion Gold 14%

2. AusQuest 16%

3. Windward Resources 23%

4. Enterprise Metals 25%

5. Segue Resources 28%

6. Classic Minerals 30%

7. Matsa Resources 31%

8. Pioneer Resources 33%

9. Buxton Resources 35%

10. Heron Resources 36%

11. Apollo Minerals 38%

12. Mining Projects Group 39%

13. Ram Resources 39%

14. Rumble Resources 48%

15. Rutila Resources 50%

16. Legend Mining 65%

17. Sheffield Resources 68%


So the takeaways are that, on average, around 65% of total company spend ‘goes in the ground’ (reported as exploration costs) with 35% on average required to cover administration costs as per the above table. First quartile performance from this limited dataset would suggest that achieving 75% ‘in-ground’ spend is around the right benchmark level.


A total of $44.7 million exploration expenditure was reported across all 23 companies – with as yet no material discovery to show for it. Collation of 2013 exploration spend is in progress such that this total is set to increase further. Including the administration costs however, the 2014 total rises towards $73 million.


Have we hit $100 million in the search for the next Nova without discovery thus far? One would suspect that we have done when pre 2014 data is fully collated – but further analysis first awaits the corresponding 2013 dataset.


As for the immediate takeaway, it is simply that getting 75% or more of dollars into the ground represents current best practice for Western Australian exploration and that around 65% into the ground is the industry average. So how is your company doing?


Good hunting.


Allan Trench is professor (value and risk) at the Centre for Exploration Targeting, University of Western Australia, professor of energy and mineral economics at Curtin University Graduate School of Business, a non-executive director to several resources sector companies – and the Perth representative for CRU Strategies, a division of independent metals and mining advisory CRU Group ([email protected]).



Austex Mining Pty Ltd is an information provider to the resources sector – email [email protected]; website www.austexmining.com