IGO's new exploration chief taps oil and gas experience to evaluate targets

IGO Ltd.'s new general manager for exploration, Suzanne Hunt, has adopted from the oil and gas sector a value-based ranking scheme for its myriad critical minerals targets to build its fiscal 2025 budget.

IGO, part-owner of the world's largest spodumene deposit at Greenbushes in Western Australia, has built up a sizable portfolio of lithium, nickel and copper exploration targets across Australia over the past five years.

Under the direction of Hunt, who joined the company in August 2023, IGO is undertaking a "budget framing exercise" this quarter before finalizing the options in the second quarter in preparation for the next financial year.

"It's about getting the biggest bang for buck for your budget," Hunt told S&P Global Commodity Insights on the sidelines of the RIU Explorers Conference in Fremantle, Australia, on Feb. 15. "This is a very systematic process in oil and gas where you're spending hundreds of millions of dollars. But assessing the expected monetary value of your project by the chance of success is something I haven't seen done that much in the minerals industry."

"When you have big land packages and a lot of targets, you need to be rigorous in assessing how you spend your money — because you can't drill everything," Hunt said.

Factoring in volatility

Hunt lectured at the Western Australian School of Mines before embarking on a 15-year career in oil and gas. She returned to mining in 2021 as global head of exploration at copper producer OZ Minerals Ltd., which was acquired by BHP Group Ltd. in 2023 during her tenure.

To use the new evaluation method, IGO will take into account each target's size, expected tonnage, expected grade and other technical factors associated with the mineral system. Those details, combined with commodity price forecasts, will be used to create an early net present value, Hunt said.

"We'll determine the probability that the target will be a success using technical and environmental, social and governance factors to come up with an expected monetary value for each of our targets, and they'll be ranked," Hunt said. The fiscal 2025 exploration budget will be determined based on the top set of targets, below which the others will be considered "optional for us as a company to pursue."

Origins in gold, oil and gas

Lithium, nickel and copper prices have seen sharp drops in recent months, and commodity volatility must be taken into account in this target evaluation methodology, Marcus Wilson, principal at Australian geological consultancy Outcrop Exploration Services Pty. Ltd., told S&P Global Commodity Insights.

The original estimated value model for use in mineral exploration was developed between Placer Dome Inc. — acquired by Barrick Gold Corp. in 2006 — and Srk Consulting (Australasia) Pty. Ltd., according to Wilson, who was part of the team that co-authored what he calls the "origination paper for the method" in a 2001 newsletter of the Colorado-headquartered Society of Economic Geologists.

Wilson, who chairs the Geological Society of Australia's Specialist Group in Economic Geology, said that when developing the new model he was aware of the trend in oil and gas to be more systematic in exploration decision-making and wanted to "follow suit."

The method is most used among midtier miners like IGO because it prevents them from spending exploration budgets on prospects that are unlikely to be economic, which happens all too often in the industry, according to Wilson.

The probabilistic formula was "pioneered by the oil and gas industry in a technical sense" through the back half of the last century, according to John Sykes from the Centre for Exploration Targeting at the University of Western Australia.

Now, the "expected monetary valuation approach is part of the best practice tool kit for exploration management, though it's harder to do in practice than it sounds in theory, so it is not as widespread as it should be" in mining, Sykes told Commodity Insights.

"The most problematic part of the whole thing is convincing yourself that the stage-based statistics you rely on to build the model to estimate the risk are real and valid," Wilson said. "That being said, our work indicates that the probabilities are not fundamentally different between commodities, except for a couple of bulk tonnage commodities."