Exploration Expenditure Research Articles

2023 Exploration and appraisal year in review

Petroleum exploration expenditure in 2023 increased modestly over that of 2022, but remains well below expenditure highs of a decade ago which were dominated by offshore activity. Exploration is dominant in onshore state jurisdictions and has been since 2019, and will continue to be with no Federal offshore petroleum exploration acreage release rounds or exploration permit awards in 2023. Despite the modest increase in exploration expenditure there were 38 exploration wells drilled in 2023, an increase from the 26 wells drilled in 2022. Three of these 2023 wells were located offshore, targeting prospective resources in the vicinity of liquefied natural gas (LNG) project upstream gas fields. Thirty-four conventional onshore exploration wells were drilled in 2023 compared to 18 in 2022, a significant increase. The Cooper–Eromanga Basin was the focus of onshore exploration drilling with 21 exploration wells, compared to 13 in 2022, which yielded six discoveries. The onshore Northern Perth Basin continues to be an exploration hot spot with five wells drilled in 2023, compared to four in 2022. The Permian Kingia Sandstone exploration play continues to deliver exploration success, with discoveries at North Erregulla Deep-1, Trigg Northwest-1, South Erregulla-3 and Tarantula Deep-1. Five exploration permits were awarded in onshore Western Australia and two in Queensland. These permits were awarded with modest exploration work programs. The interest in carbon capture and storage projects and assessment acreage continues with a Federal offshore greenhouse gas (GHG) release round in 2023 and 26 onshore state jurisdiction GHG assessment permits awarded or nominated preferred tender status.

2022 Exploration & Appraisal Year in Review

Petroleum exploration activity in Australia decreased in 2022. The total number of exploration wells drilled and expenditure across Federal offshore and state jurisdictions decreased from 2021 levels. The number of exploration permits awarded and acreage made available for exploration was also lower than that of 2021. However, more appraisal wells were drilled in 2022. Onshore exploration expenditure in Australia has exceeded that of the offshore since 2019 and remains the focus of exploration activity. Exploration activity and expenditure has not followed the increase in oil and gas prices of recent years, suggesting external factors are suppressing and impeding exploration activity.

Exploration and appraisal year in review 2022

Petroleum exploration activity in Australia decreased in 2022. The total number of exploration wells drilled and expenditure across Federal offshore and state jurisdictions decreased from 2021 levels. The number of exploration permits awarded and acreage made available for exploration was also lower than that of 2021. However, more appraisal wells were drilled in 2022. Onshore exploration expenditure in Australia has exceeded that of the offshore since 2019 and remains the focus of exploration activity. Exploration activity and expenditure has not followed the increase in oil and gas prices of recent years, suggesting external factors are suppressing and impeding exploration activity. Twenty-six exploration wells were drilled in the year compared to 29 in the previous year, resulting in one offshore and eight onshore petroleum discoveries. The Pavo oil discovery in the Bedout Sub-basin and in the same exploration play as the Dorado oil discovery of 2018, was the only offshore discovery in 2022. Onshore exploration ‘hot-spots’ include the Northern Perth Basin and the Cooper–Eromanga Basin. The Permian Kingia Sandstone play of the Northern Perth Basin yielded the South Erregulla and Gynatrix gas discoveries, and the Jurassic Namur Sandstone play of the Cooper – Eromanga ‘Western Flank’ was extended yielding the Bangalee-1, Coorong-1, Magic Beach-1 and Rocky-1 oil discoveries.

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

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.

Country competitiveness and investment allocation in the mining industry: A survey of the literature and new empirical evidence

Mining exploration investment is the primary driver of future mining production. Without exploration investment, it is not possible to sustain metal production. Countries with higher mining competitiveness will tend to attract larger amounts of exploration investments. According to the so-called “traditional” view, a country's geological potential is a crucial determinant of its mining competitiveness. This proposition implies that the geological potential would be the primary driver for allocating exploration investments worldwide. Recently, an “alternative” view of mining competitiveness emerged. According to this hypothesis, a country's investment climate is the primary determinant of its mining competitiveness. However, the empirical evidence supporting the “alternative” view is still scarce.This article aims to analyze the validity of these two competing views. First, we survey the literature on the subject to identify the main determinants of total mining exploration expenditure, which is the leading indicator of mining competitiveness identified in the literature. Second, to analyze the total mining exploration expenditure's determinants, we develop an exponential mean model to test the “alternative” view. We use the Poisson Pseudo-Maximum Likelihood (PPML) method to obtain the parameter estimates, considering our dependent variable's non-linear and skewed nature.Working with a cross-sectional dataset of 72 countries for 2014, we find strong empirical support for the “alternative” view of mining competitiveness. Total budgeted mining exploration expenditure is positively determined by two location factors: countries' geological potential and investment climate. Besides, we analyze the impact of two additional drivers on mining competitiveness: social conflicts and population density. These variables have a statistically significant negative effect on mining competitiveness. Likewise, we estimate regional average elasticities to measure the drivers’ impact on mining competitiveness in North America, Oceania, Europe, Latin America, Asia, and Africa. The effects of these drivers vary enormously across world regions. Finally, we show that the investment climate has a strong elastic impact on attracting mining exploration investments in all the distribution deciles through a quintile analysis. Simultaneously, the geological potential triggers a relevant but still inelastic effect starting in the sixth decile. Our findings can help policymakers and business people to develop strategic plans to attract mining investments and promote economic growth in different jurisdictions.

Processing Tests, Adjusted Cost Models and the Economies of Reprocessing Copper Mine Tailings in Chile

To increase resource efficiency, mining residues–especially tailings–have come into the focus of research, companies, and politics. Tailings still contain varying amounts of unextracted elements of value and minerals that were not of economic interest during production. As for primary mineral deposits, only a small share of tailings offers the possibility for an economic reprocessing. To minimize exploration expenditure, a stepwise process is followed during exploration, to estimate the likelihood of a project to become a mine or in this case a reprocessing facility. During this process, costs are continuously estimated at least in an order of magnitude. Reprocessing flowsheets for copper mine tailings in Chile were developed and costs and revenues of possible products from reprocessing were examined for a rough economic assessment. Standard cost models with capex and opex for flotation, leaching, and magnetic separation were adopted to the needs of tailings reprocessing. A copper tailing (around 2 M t) that also contains magnetite was chosen as a case study. A combination of magnetic separation and leaching gave the best economic results for copper and magnetite. The adopted cost models showed positive results at this early stage of investigation (semi-technical scale processing tests).

Determining factors of investment in mineral exploration

The objective of this study was to identify the critical factors that favour attracting a greater investment in mineral exploration. An explanatory methodology was used. Through econometric models, the relationship and/or interaction between the variables that had an impact on the defined dependent variable was demonstrated. This study used a new proxy variable to quantify geological potential: mining production value. Likewise, a new variable, land area/population, and other variables such as exploration expenditures, index of economic freedom, mining reserves, surface area and population were included. Following the formulations of previous studies, three models were estimated: linear logarithm, normalised and competitiveness model. It is concluded that, the greater the geological potential and investment climate, the higher investment in mineral exploration will be. Meanwhile, high population density leads to the opposite effect. Future studies should consider other variables or even new formulations to more robustly explain the competitiveness of countries to appear attractive to mineral investments.

Determining factors of investment in mineral exploration

The objective of this study was to identify the critical factors that favour attracting a greater investment in mineral exploration. An explanatory methodology was used. Through econometric models, the relationship and/or interaction between the variables that had an impact on the defined dependent variable was demonstrated. This study used a new proxy variable to quantify geological potential: mining production value. Likewise, a new variable, land area/population, and other variables such as exploration expenditures, index of economic freedom, mining reserves, surface area and population were included. Following the formulations of previous studies, three models were estimated: linear logarithm, normalised and competitiveness model. It is concluded that, the greater the geological potential and investment climate, the higher investment in mineral exploration will be. Meanwhile, high population density leads to the opposite effect. Future studies should consider other variables or even new formulations to more robustly explain the competitiveness of countries to appear attractive to mineral investments.

Geophysical implications for the exploration of concealed orogenic gold deposits: A case study in the Sandy Lake and Favourable Lake Archean greenstone belts, Superior Province, Ontario, Canada

Since 2000, gold discovery rates have not reflected the record levels of exploration expenditure, with those discoveries that are made being predominantly in areas of post-mineral cover. Hence, gold exploration has been increasingly focused on concealed exploration targets where geophysics takes on an increasingly important role in the exploration process.Archean orogenic gold deposits are attractive exploration targets that represent a major proportion of global gold resources. Orogenic gold deposits consistently form late during the tectonic and structural evolution of their host terranes, normally during a transition from compressional to transpressional tectonic stress regimes. Thus, for target generation, the late timing of gold mineralization within the structural history of a prospective orogenic belt is crucial, as it means that current geological maps and sections reflect the geometry of the gold deposits at the time of formation unless there has been subsequent orogeny. Lithological contacts between granitic intrusions and volcano-sedimentary greenstone sequences, as well as between volcanic and sedimentary sequences, are important rheological and geochemical trap sites. Lithosphere-scale faults and dilational jogs in second-order faults act as ore-fluid conduits with anticlinal folds as structural traps for ore-fluid infiltration and gold deposition given suitable host rocks and fluid seals.Geophysical exploration for concealed orogenic gold deposits is challenging due to normally subtle petrophysical contrasts between the gold lodes and their host rocks. Most greenstone-hosted lode-gold deposits do not contain strong conductors as they normally contain <5 vol% of disseminated arsenopyrite and pyrite, which are poor conductors, and rarely contain significant quantities of strong conductors such as pyrrhotite. However, pyrrhotite may be a component of rock sequences such as sulfidic shales or cherts adjacent to the orogenic gold lodes. It is proposed that the combination of HTEM and magnetic surveys be used to explore for concealed orogenic gold deposits, using the Favourable Lake and Sandy Lake greenstone belts in the Superior Province, Canada, as a case study. AIP Cole-Cole time-constants, combined with magnetic and EM data, can efficiently detect disseminated pyrite/magnetite at shallow depths, indicating their potential use as vectoring tools for concealed Archean orogenic gold deposits.

Great Mining Camps of Canada 8. The Bathurst Mining Camp, New Brunswick, Part 2: Mining History and Contributions to Society

In the Bathurst Mining Camp (BMC), 12 of the 45 known massive sulphide deposits were mined between 1957 and 2013; one was mined for iron prior to 1950, whereas three others had development work but no production. Eleven of the deposits were mined for base metals for a total production of approximately 179 Mt, with an average grade of 3.12% Pb, 7.91% Zn, 0.47% Cu, and 93.9 g/t Ag. The other deposit was solely mined for gold, present in gossan above massive sulphide, producing approximately one million tonnes grading 1.79 g/t Au. Three of the 11 mined base-metal deposits also had a gossan cap, from which gold was extracted. In 2012, the value of production from the Bathurst Mining Camp exceeded $670 million and accounted for 58 percent of total mineral production in New Brunswick.Base-metal production started in the BMC in 1957 from deposits at Heath Steele Mines, followed by Wedge in 1962, Brunswick No. 12 in 1964, Brunswick No. 6 in 1965, Caribou in 1970, Murray Brook, Stratmat Boundary and Stratmat N-5 in 1989, Captain North Extension in 1990, and lastly, Half Mile Lake in 2012. The only mine in continuous production for most of this time was Brunswick No. 12. During its 49-year lifetime (1964–2013), it produced 136,643,367 tonnes of ore grading 3.44% Pb, 8.74% Zn, 0.37% Cu, and 102.2 g/t Ag, making it one of the largest underground base-metal mines in the world.The BMC remains important to New Brunswick and Canada because of its contributions to economic development, environmental measures, infrastructure, mining innovations, and society in general. The economic value of metals recovered from Brunswick No. 12 alone, in today’s prices exceeds $46 billion. Adding to this figure is production from the other mines in the BMC, along with money injected into the local economy from annual exploration expenditures (100s of $1000s per year) over 60 years. Several environmental measures were initiated in the BMC, including the requirement to be clean shaven and carry a portable respirator (now applied to all mines in Canada); ways to treat acid mine drainage and the thiosalt problem that comes from the milling process; and pioneering studies to develop and install streamside-incubation boxes for Atlantic Salmon eggs in the Nepisiguit River, which boosted survival rates to over 90%. Regarding infrastructure, provincial highways 180 and 430 would not exist if not for the discovery of the BMC; nor would the lead smelter and deep-water port at Belledune. Mining innovations are too numerous to list in this summary, so the reader is referred to the main text. Regarding social effects, the new opportunities, new wealth, and training provided by the mineral industry dramatically changed the living standards and social fabric of northern New Brunswick. What had been a largely poor, rural society, mostly dependent upon the fishing and forestry industries, became a thriving modern community. Also, untold numbers of engineers, geologists, miners, and prospectors `cut their teeth’ in the BMC, and many of them have gone on to make their mark in other parts of Canada and the world.

Effective utilization of seismic reflection technique with moderate cost in uranium exploration

ABSTRACTIn participation with numerous industrial partners, the Seismic Laboratory of the University of Saskatchewan has conducted a variety of active seismic reflection experiments; both on the west and east sides of the Athabasca Basin. Results of the investigations at Shea Creek, McArthur River and Keefe Lake illustrate that the seismic investigations deliver effective, highly relevant primary structural images of the subsurface, with resolution that no other geophysical technique can match. Correlation of similar seismic signatures, on several distant but inter‐related seismic sections, allowed spatial extension of promising exploration target zones previously unrecognized. Within the three‐dimensional seismic volume, comparable reflectivity patterns defined the complex areal distribution of mineralization‐related fault systems. Beyond these novel contributions, extended analysis of seismic signal attributes (amplitude and frequency), optical televiewer, and full‐wave sonic data offer detailed lithological characterization, including alteration zones, clay content, as well as porosity and fracture density information. Although these structural and geologically relevant anomalies are primary indicators of mineralization, presenting novel exploration advantages, the seismic method is still not a standard component of the Athabasca Basin exploration approach, due to the negative perception that ‘it is very expensive’. Comparing the costs of all geophysical techniques to the cost of a single logged drill hole illustrates that the results of a properly designed seismic data acquisition program not only leads to more effective planning of a drilling program, but also would lead to a much quicker recognition of the major mineralized zone(s), and a reduction in the number of required exploration boreholes. This integrated approach to exploration would then translate into a significant reduction of the total exploration expenditures. Unquestionably, the drilling of boreholes provides the most explicit, reliable information to a certain depth, but only within a very small area. Directly connecting the borehole information to seismic results extends the local reliable data; permitting reduction of the number of boreholes to create accurate two‐dimensional or three‐dimensional subsurface images and reduction of the expenditures of the total exploration program.

Imitation in Product-Market Competition and Accounting Reporting

ABSTRACT We analyze the economic impact of the accounting treatment of exploration expenditures in three different accounting regimes: aggregate disclosure, disaggregated disclosure, and a voluntary choice. The disclosure of information regarding the outcome of exploration can be used by competitors in two ways: to assess the competitive gain of the firm or to imitate the firm's exploration. Different accounting treatments provide different information for these two purposes and, thereby, affect investment decisions differently. We find that, if an accounting regime change that increases information about exploration outcomes is enforced, the leader's investment decision in general becomes more extreme. On the one hand, leaders with high investment costs may decrease their investment because the spillover effect is too strong. On the other hand, interestingly, leaders with low investment costs may actually increase their investment to dilute the imitation-useful information and even intimidate competitors.

Appraisal of the USGS Three-Part Mineral Resource Assessment through estimation of the orogenic gold endowment of the Sandstone Greenstone Belt, Yilgarn Craton, Western Australia

Regional-scale ground selection presents a significant risk in mineral exploration targeting. As any exploration search space contains a finite and fixed number of ore bodies, selection of barren or depleted search spaces incurs wasted exploration expenditure. By defining regions of estimated high mineral endowment, via generation of quantitative information as to the value of potential discoveries, mineral exploration effectiveness, project acquisition, and exploration portfolio management can be improved. The Three-Part Mineral Resource Assessment, developed by the United States Geological Survey (USGS), is a methodology designed to assist in this process. Here, two separate assessments are applied to estimate the orogenic gold endowment of the Sandstone Greenstone Belt in the Yilgarn Craton, Western Australia. First, the results of a global regression assessment (median endowment of 33 t/1.16 Moz Au, mean of 130 t/4.59 Moz Au), based on an available, but outdated, global grade-tonnage model for low-sulfide gold-quartz vein deposits, suggest that most outcropping and shallow orebodies in the Sandstone Greenstone Belt have been discovered and fully delineated. In contrast, an expert assessment (median endowment of 210 t/7.41 Moz Au, mean of 220 t/7.76 Moz Au), using expert-derived grade and tonnage distributions specific to the Sandstone Greenstone Belt, predicts that significant gold mineralization remains to be discovered, largely beneath cover. The contrasting assessments imply a step change in exploration focus, from surficial deposits at the time of the USGS global grade-tonnage model to those buried under cover at the present time. The expert assessment, in contrast to the global regression assessment, implies the potential for deeper exploration targets within the Sandstone Greenstone Belt. Based on the predicted total number of deposits, much of the undiscovered mineral endowment is likely to be distal to known ore bodies, beneath cover, and at greater depths within the belt.

Mining\u2019s contribution to national economies between 1996 and 2016

In several low- and middle-income countries rich in non-fuel mineral resources, mining makes significant contributions to national economic development as measured by the revised Mining Contribution Index (MCI-Wr). Ten countries among the 20 countries where mining contributes most (highest MCI-Wr score) have moved up one or two steps in the World Bank’s country classification between 1996 and 2016. In particular, African countries have benefitted. Socio-economic development indicators also show signs of progress for African mineral-rich countries. This paper provides an update and expansion of an earlier study within the framework of the United Nations University (UNU) World Institute for Development Economics Research (WIDER) initiative Extractives for Development. Based on the detailed data available for the sector, such as production, export, prices, mineral rents, exploration expenditure and government revenues, an analysis is carried out of the current situation for 2016, and trends in mining’s contribution to economic development for the years 1996–2016. The contribution of minerals and mining to GDP and exports reached a maximum at the peak of the mining boom in 2011. Naturally, the figures for mining’s contribution had declined for most countries by 2016, but importantly the levels were still considerably higher than in 1996. The results of this survey contradict the widespread view that mineral resources create a dependency that might not be conducive to economic and social development. In addition, this paper presents an attempt to use already available socio-economic indicators for African mineral-rich countries to measure socio-economic developments. One preliminary conclusion of this survey is that mining countries perform better than oil-producing countries and non-mineral countries in Africa as measured by these indices of human development and governance.

Innovators and Imitators in Product-Market Competition and Accounting Reporting

In this study, we examine firms' investments in explorative initiatives and their choices of capitalization method in a product-market competition setting. Since the capitalization of exploration expenditures may contain information on whether a firm's exploration investment is successful, financial reports may reveal important information to competitors, and thus may have real consequences in product-market competition. In our paper, we identify two driving forces that induce firms to choose different capitalization methods: an information-spillover effect and a preempting effect. We also find that enforcing an accounting method that requires firms to capitalize expenditures of only successful explorations may increase or decrease innovation investments. Our study sheds light on the impact that the recognition of exploratory success has on firms' exploration investments.

Long-term availability of global uranium resources

Against a backdrop of decarbonisation in the energy sector and the increasing share of nuclear power in the global power mix, availability of uranium resources presents a major challenge. Since it will be some time before technologies of future nuclear reactors which remove the reliance on natural uranium are fully deployed, it is relevant to analyse the availability conditions for uranium in the 21st century.The first two conditions - technical accessibility and economic value - are associated with production cost. We study these by modelling the ultimate uranium resources (including both identified and undiscovered resources) and their cost. This method is based on a regional breakdown of global uranium resources, current known deposits and an economic filter. It allows us to establish a long-term supply curve in which the quantities of technically accessible uranium resources are represented as a function of production cost.The other uranium availability conditions considered are associated with market dynamics, which created by the relationship between supply and demand. These are modelled in the form of dynamic constraints in a partial equilibrium market model. This is a deterministic model in which the market players are represented by regions. It allows us to take account, for instance, of the short-term correlation between price and exploration expenditure. In the longer term, the constraints modelled include anticipation of demand from electric utilities (the consumers) and the increasing scarcity of the least costly ultimate resources.Using a series of forward looking simulations, we demonstrate that the rate of growth in demand for uranium in the 21st century and its anticipation have a major impact on the increase in price in the long-term. Conversely, uncertainties related to the estimation of ultimate resources have a limited effect. Lastly, some variations in supply (uranium production shutdown in a particular region, for example) or demand (irregular increase) also have a significant impact on long-term price trends or cycles.

Accounting in the London Stock Exchange's extractive industry: The effect of policy diversity on the value relevance of exploration-related disclosures

The accounting treatment of exploration expenditure in the extractive industry has historically been a challenging issue for regulators. This paper examines the accounting policies for, and value relevance of, the exploration assets of firms listed on the London Stock Exchange from the oil & gas and mining sectors. The policies used by oil & gas firms range from the relatively conservative Successful Efforts to the most aggressive Full Cost method, whereas mining firms employ a range of policies from the Successful Efforts to the most conservative Expense All method. The results suggest that the income statements of Main Market-listed extractive firms contain value relevant information regardless of the policy followed by the firm. There is no significant difference between the value relevance of exploration asset disclosures by Main Market-listed oil & gas firms following the Successful Efforts or Full Cost methods. For AIM-listed oil & gas companies only the Full Cost method provides value relevant information on exploration assets. In the mining sector, exploration-related asset disclosures are only value relevant for AIM-listed firms following the Expense All method. The results suggest that flexibility in accounting for exploration expenditure is necessary to facilitate the disclosure of value relevant accounting information.

A safer bet? Evaluating the effects of the Extractive Industries Transparency Initiative on mineral investment climate attractiveness

The Extractives Industries Transparency Initiative (EITI) is a governmental initiative focused on improving transparency and accountability within resource-rich countries. Given EITI implementation is entirely voluntary, and time and resource intensive in nature, demonstrating the benefits of implementation for participating countries is important to the initiatives long term success. Using panel data for 167 countries from 2003 to 2014, this article analyses the impact of EITI implementation on a country’s mineral investment attractiveness, represented here by the amount of grassroots corporate mineral exploration expenditure within a country. The results suggest that EITI implementation does have a statistically significant positive impact on a country’s ability to attract mining company investment.

Impact of Pulling Down Regulatory State Barriers on Uranium in Australia: Is There a Need In Order to Maintain and Increase Australia's Global Market Share of Uranium?

This paper sets a prospective framework to study the impact of opening more mines to meet future growing demand on Australia’s economy. The structure is aimed at decomposing investments and exports variables into Uranium exports and Uranium Exploration expenditure and analyse their impacts on each State GSP (Goods State Product) and for Australia as a nation. The demand and supply factors affecting the uranium market are defragmented before providing the research methodology and data specifics. Later analysis is expected to have policy implications by serving as a guide to pull down State Regulatory barriers like those imposed currently in Queensland, which is rich with uranium deposits and allow only uranium exploration but no uranium mining. Empirical findings would suggest whether exporting the carbon free energy would add value to Australia’s different competing states and as a whole globalized economy.

The value relevance of exploration and evaluation expenditures

Purpose – This paper aims to investigate the value relevance of the various components of exploration and evaluation expenditures in the Australian extractives industry. Whether exploration and evaluation expenditures is more value relevant, following the adoption of AASB 6, and whether it differs for firms engaged only in exploration when compared to those also engaged in mining production is also examined. Design/methodology/approach – This paper uses a modified Ohlson model as a benchmark against which to compare an alternative valuation model featuring the disclosed components of exploration and evaluation expenditures. A sample comprising 430 firm-year observations between 2003 and 2009 is utilised. Findings – Written-off exploration and evaluation expenditures and the number of projects in which firms are involved is relevant to investors when assessing the value of extractive firms. Further, the implementation of AASB 6 has led to an improvement in the relevance of exploration and evaluation information in assessing firm value. Research limitations/implications – The sample is based on observations from the years 2003-2004 to the years 2006-2009. The authors do not incorporate 2005, as this is the first year the new standard was implemented, and there is the possibility of a settling in effect. The authors base our sample on the top 100 extractive firms in 2009. As such, these companies may not represent the accounting practices of smaller firms in the Australian extractive industry. Originality/value – The authors address a gap in the literature by examining the value relevance of the detailed line items of exploration and evaluation expenditure reported by extractives firms. The authors also explore the effect of regulatory changes by examining the value relevance of exploration and evaluation expenditures pre- and post-International Financial Reporting Standards (IFRS) 6/Australian Accounting Standards Board (AASB) 6 implementation. Finally, the authors contribute useful findings to the standard setters’ ongoing deliberations aimed at producing a comprehensive standard on extractive activities by providing useful feedback on the relevance of accounting for pre-production costs under a regime using the “area of interest” method.