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The appraisal of a mineral exploration venture in the Sandon Mining Camp, British Columbia Graham, John Donald

Abstract

An approach pioneered by M. Allais in his evaluation of the exploration potential of the Algerian Sahara has been applied to the evaluation of a very much smaller region. The region investigated is a two square mile area, termed the "exploration area", situated in the silver-lead-zinc Sandon mining camp, Slocan Mining Division, British Columbia. Although virtually unprospected because of overburden cover, the exploration area appears to be as favourable to ore deposition as the adjacent parts of the camp. In order to estimate the mineral deposit distribution in the area a count of mineral deposits in adjacent parts of the camp has been undertaken. The mineral deposits in these parts were counted from an examination of geological maps. The counted distribution may be regarded as a sample of the deposit distribution in the Sandon camp, including the exploration area. The true distribution in the camp may be assumed with a high degree of probability to lie within the 95 per cent confidence interval of a Poisson distribution representing the sample distribution. The observed distribution and the upper and lower confidence limits define three estimates of the number of deposits existing in the exploration area. These estimates may therefore be said to represent three approximations of the situation in the exploration area. These approximations have "been termed the mean, low and high models, respectively. Value of the mines likely to exist has been obtained from a study of the frequency distribution of 14 Slocan mines. The gross value of recoverable metal content (referred to as gross value) for the median mine in this distribution was taken to represent the most probable gross value of a discovered mine. Resultant discovery probability for the mines, important prospects, prospects, and showings postulated to exist in the exploration area has been estimated at 0.45, 0.45> 0.35 and 0.3 > respectively. The effect of variations in these estimates has been investigated. The cost of exploration has been calculated for each model, envisioning a program to explore the area in stages. Costs are largely a function of the number of deposits existing, uncovered and examined. The merits of the exploration venture have been measured for each model by comparing exploration costs with the expectation (present value of all mines in a model multiplied by the probability of finding them). Using the assumed value of both mines and resultant discovery probability, the venture appeared marginal when measured against a minimum acceptable return of 150 per cent. Comparison of cost vs. expectation using lower estimates of these two parameters indicated that the venture is not economic. However, considering the essentially marginal nature of the venture a $6,500 expenditure to gather more detailed information for a revaluation is warranted. Thus Allais's approach to evaluation has been found to give a realistic and useful quantitative appraisal of the exploration area.

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