The Drilling Investment Decision In Mineral Exploration

The objective of delineation drilling is to provide a data base for the tonnage and grade estimates required to evaluate the economics of mine development. As drilling information is accumulated, geological risk is reduced and more reliable estimates of tonnage and grade are obtained. Investment in drilling is justified by the benefits which result from improving the reliability of the economic criteria evaluated. These benefits are subject to diminishing returns, i.e. as drilling information is accumulated the reliability of the economic criteria evaluated is improved but at a decreasing rate. At the same time, costs are incurred -- the direct investment cost associated with additional drilling and the time cost of delaying possible production revenues. The economic sampling limit is de- fined by the point at which the marginal benefits from drilling investment just balance the marginal costs. The paper describes the formulation of an economic model to optimize investment in delineation drilling. The model is applied to a simulated mineral deposit to illustrate the economic effects of a sequential drilling program.