By Dr Geoffrey Batt, Minerals Research Institute of Western Australia
The value proposition for collaborative research in mineral exploration.
Can a cash-strapped mineral exploration company with negative cash flow and targets justify spending money on research? That’s the question The University of Western Australia PhD student Sistine Sun was setting out to answer when she sat down to analyse the financial performance of Australia’s small‑cap mining sector for the Minerals Research Institute of Western Australia (MRIWA).
The answer matters a great deal if we want to support the long-term success of the mining industry. Innovation – fundamental improvements in the way we do things; new ideas and products; faster, cleaner production; novel styling to drive market desire; and developments that set you apart from competitors or lower your cost of doing business – is a key driver of success in any competitive marketplace.
This relationship is perhaps even easier to isolate in mineral exploration than many other fields of business. This key enabling component of the wider mining industry – the foundational work of sniffing out and proving the value of undiscovered mineral resources – is a high-risk field. Anybody who tells you differently is probably trying to sell you something.
Australia’s mineral endowment – the iron ore, gold and critical resources that underpin a substantial proportion of the current national wealth – is a one‑off bounty. For all that we may lead the world in many aspects of the technology and practice allowing the safe and efficient extraction of these valuable commodities locked within the bedrock by geological providence in the ancient past, the depletion rate of many known resources – the speed with which our miners are extracting proven ore deposits from the ground to feed the needs of urban development and increasing living standards around the world – is outstripping the rate at which new deposits are being discovered.
For Australia, this generic challenge is compounded by the long and proud history of our mining industry. With a national economy underpinned by waves of mineral discovery and exploration over the course of the past two centuries, there are very few parts of this vast and sunburnt land where an aspirational company can genuinely be the first to explore the landscape and assess its mineral potential. All the ground has been walked – often many times over. All the rocks have been kicked by the boots of generations of keen‑eyed prospectors who have evaluated the economic potential of the geology and moved on, saying, in effect: ‘There’s nothing here that is worth my while.’
With this absence of a physical frontier to forge, the advantages of a first mover in the exploration sector now fall to those who can change the search space in other ways. The art of modern exploration, then, is to find things that others have overlooked – or perhaps not even known how to look for. We need technologies to access rocks out of the reach of previous generations of geologists; new techniques to identify subtle chemical clues to hidden mineralisation; new conceptual insight to better read the four-dimensional puzzle of a geological landscape and predict where valuable resources may yet await discovery.
In the face of this key imperative for Australian mineral exploration companies to pursue novel technologies and innovation, the challenge set to Sun arises from the common structural reluctance observed for smaller exploration and mining companies to engage in research. This matters a great deal to the sector because a disproportionate amount (as much as 70 per cent in Australia) of greenfields mineral exploration – the key frontier investigation undertaken in areas where mineralisation is not yet known to occur – is done by these industry juniors – small-cap companies with focused strategies and limited resources.
In interviewing executives from some of these smaller industry players, Sun found a common perception that these lean enterprises, burning through their resources to deliver tangible outcomes to announce to the market – sampling, drilling and other investigations on the ground to prove the existence of hidden mineralisation – often feel they can ill-afford the manpower and cost to undertake or support research and development (R&D). The exploration game is uncertain. So is research. It’s hard – Sun was repeatedly told – to convince the average investor to back a company taking on both risks.
With this understandable eye to the short-term demands of investors, these companies may be missing out on the long-term discoveries and innovations that could drive the future value and success of their industry – and the national wealth that stems from that foundation.
Do you know how to recognise economic mineralisation through 100 metres of cover rocks? Neither do I. But I do know that productive and talented Australian research groups with long track records in mineral science are working on that problem right now. And other researchers are working to build new understanding of the geological history and structure of our continent and the processes that shaped our nation’s mineral endowment in the past.
The essence of my role at MRIWA lies in connecting creative thinkers with dynamic industry partners, where their research can address the complex challenges of mineral exploration and discovery. We help catalyse and support a thriving ecosystem of specialists and services, creating the conditions where innovation can truly flourish.
This is research that individual companies often couldn’t fund alone. It brings together a diverse mix of educated, creative minds — each approaching problems from different angles, learning from one another, and refining ideas through collaboration. At the heart of it all is the transfer of knowledge: between people, across disciplines, and throughout the system — enabling everyone to work together toward a common goal. Companies and societies that can build and maintain this kind of ecosystem have a greater capacity to solve their problems. Each partner in a collaborative relationship like this spends their efforts on what they do best to contribute to the overall progress of a solution – helping to make the process of innovation more efficient for everyone.
Think of this as a symbiotic relationship – like photosynthetic algae living within the bodies of colonial corals. In that case, the algae get protection from the elements and the ocean denizens who would love to graze on their energy-rich goodness, while the corals get extra nutrients, and the result is the Great Barrier Reef. This is two very different organisms working intimately together, each doing what they do best, and the result is a greater success than either could achieve alone – a biological structure visible from space.
For all the concerns expressed by the exploration company executives interviewed in her study, Sun found a comparable result when she analysed the long‑term financial performance of 8890 Australian small-cap mining firms – with a strong positive correlation between reported R&D expenditure and growth in market valuation.
There’s a lot to delve into to fully understand that result – and Sun is hard at work following up on her observations. The fundamental message, though, is clear: Australia’s small-cap explorers are better off when they participate in the vibrant national research and innovation ecosystem.
True, that might not always hold up in the short term – after all, even the happiest of symbiotic partnerships sometimes go through some rocky patches. Much like a struggling exploration company cutting back on R&D expenditure in a downturn when conditions get tough, reef-forming corals sometimes eject the algae that normally live within their bodies. Tough for the algae, but that’s the way the ecosystem rolls – the coral does what it has to in order to survive.
When things return to normal, though, it’s the corals that strike that relationship back up that are more vigorous and competitive, and go on to dominate the next generation of the reef. Do you want to take a guess at what happens to the corals that don’t get a symbiotic partner back on board?
About the author
Dr Geoffrey Batt is a Research Portfolio Manager with the Minerals Research Institute of Western Australia, a state government body working to catalyse and support impactful minerals research for the benefit of Western Australia. Dr Batt leads the institute’s strategic programs in mineral exploration and circular economy approaches to tailings and waste, working with leading scientists and research groups to address the challenges and opportunities of the minerals industry.
