The treatment of uncertainty in mineral exploration and exploitation

Abstract

A sequential method of modeling the increase in precision of expected net revenues for a proposed exploration and exploitation program has been developed. Embedded within a computer simulation model of the exploration process, which incorporates a method of learning about deposit characteristics, is a multi-stage stochastic optimization process model to determine the optimal exploitation pattern of the deposit. This approach stresses the interdependence of the planning of the exploration and exploitation processes.

The model can be used to determine the amount of exploration which should be undertaken in an area by more precisely predicting the long-range profitability associated with the amount of exploration. Thus, decision makers are provided a capability which reduces the uncertainty in profitability outcomes over future production periods.