Analyzing mineral exploration efficiency: too little for too much?? Evidence from project valuations and implied discovery probabilities

This paper analyzes the drivers of early-stage mineral project valuations and explores the broader efficiency of exploration investment in the copper and gold sectors. Building on a simplified decision-theoretic framework, we develop an econometric model using a curated dataset of exploration-stage transactions. For copper, results show that the in situ value is positively associated with geological information (measured by drilling meters) and national copper production. At the same time, resource size and institutional quality (proxied by the Rule of Law Index) have a negative effect. These findings suggest that project-level certainty and host country mining infrastructure enhance valuations, whereas large deposits and more mature jurisdictions may be discounted. For gold, results are less conclusive due to a smaller sample, although national reserves and production appear to influence valuations. At a global scale, we estimate the implied probability of discovery by relating total exploration expenditures to the market value of discoveries over time. Results indicate a significant deterioration in exploration efficiency: for copper, the implied probability rose from 23% in 2004–2009 to 631% in 2020–2024; for gold, it escalated from 879% to 1,522% across the most recent periods. These findings highlight growing misalignments between exploration investment and discovery value, raising concerns about the sustainability of exploration financing models under current geological and market conditions.