Defining geological maturity: The effect of discoveries on early-stage mineral exploration

Abstract

Mining investment and competitiveness depend mostly on two variables: the institutional framework and the geological maturity. Particularly, the geological maturity depends on the combined effect between positive information spillovers, and the negative effect from the depletion of exploration opportunities. Using copper and gold discoveries, we estimate geological maturity as the effect of discoveries on early-stage exploration expenditures. Results suggest that each additional copper discovery has an effect that is not different than zero, signaling that information spillovers and depletion effects are balanced. On the other hand, each additional gold discovery has a positive and significant effect, suggesting that information spillovers still dominate over the depletion of exploration opportunities.We further analyze the effect by time period, company type and geographical region. For copper, the net effect appears not statistically different than zero over time; however, gold results show a slight declining trend during the period of analysis. In terms of company type, both copper and gold results indicate that junior companies would be closer to depletion than major companies. The analysis by geographical region shows that the Asia-Pacific region appears more mature than the rest of the world for copper. Nevertheless, gold results do not indicate a more mature region.