"We need to double the exploration effort if we are to avert the looming reserve crisis," she said during the PDAC convention in Toronto.

Replacement projects have not been coming down the development pipeline at the same rate as mines have been shuttered over the past two decades, while exploration expenditures have gone from a high of US$34 billion in 2012 to a low of $11.6 billion in 2016. In 2017-18, it rebounded slightly, only to drop again in 2019.

Large miners have increased exploration spending in recent times, albeit consolidation in the industry has pared back some of that expenditure. Meanwhile, juniors have to rely mostly on equity markets that have been avoided by private and public equity investors.

"They don't see the exploration industry as a viable play that delivers on promises. They instead choose the tech sector," Farmer said.

Farmer suggested two critical steps the industry could take to regain trust. Number one, get serious about investing in people.

"The industry pays too much attention to mining and not enough on understanding our resources"

"When markets turn down, exploration staff are usually the first to be let go, and the fact is, they don't come back. We don't have statistics, but we know there is a great attrition rate," she said.

"So, when prices are up and exploration budgets run, the industry is forced to hire juniors right out of school and entrust them to manage multi-million-dollar exploration programmes. It doesn't help our credibility to deliver the best bang per buck."

The other major trust issue is the industry's sliding reputation for "delivering the science". Much of it has to do with rushing to development and production, resulting in poor quality first-principles geological work.

Farmer used to two case studies.

In the first, a small gold company in Ontario had put out a preliminary economic assessment in 2011, emboldened by gold's 29% price gain. "There was a really big impetus to put things into production to leverage the high price."

The company announced a multi-million-dollar project to start trial mining while still undertaking more exploration. "In 2013, the company put out a second PEA, not a feasibility study. Yet they had already started digging the shaft and buying equipment for the underground operation and a new mill," she said.

By 2015, the company announced the first gold pour, yet by December that year, the entire operation was shuttered. In January 2016, it produced a new resource statement, slashing indicated resources by 90% and inferred by 86%.

"This is a pretty big and sad indictment on the industry. There were hundreds of millions of dollars invested in the project. This is the kind of failures people remember, and it's difficult to come back from it," said Farmer.

By 2018, the company again updated the resources, showing growth. In 2020, it announced a feasibility study, nine years later, admitting it did not understand the geological model. "The example underlines we don't spend enough time and effort on our basics," Farmer said.

The other case study also showed a lack of understanding of a resource model.

Geology comes first, and second

A key question arose in both cases around the use of independent consultants to review resource models.

"This raises the question - are we dictating to our consultants what the results should be, and they deliver it? Something is very wrong because globally renowned consultants were involved," said Farmer.

"We believe independent consultants should be independently verified themselves, to pressure-test the exploration models. The industry pays too much attention to mining and not enough on understanding our resources."

Farmer reminded the audience, "geology comes first", a mantra that seemed to have gone out of fashion.

"We should never forget that," she said.

Farmer's experience showed many companies surviving project capex blowouts, but not many getting through failures in resource models or resource calculations. "You get it wrong, it's not easy to come back."

"To be confident in the resource model, it's always important to iterate, verify and validate."

Strong leadership was also fundamental to winning back investor trust, Farmer said.

"We underestimate the value of bringing-in multidisciplinary teams for grassroots exploration. Collecting things like baseline environmental information costs are cheaper the earlier stage the project is," she said.

Further, technological breakthroughs in machine-intelligence assisted exploration was only as good as data inputs and relied heavily on good geologists to verify data.

"We have to win back investor confidence, otherwise we won't have the capital to succeed in turning the tide on the reserve crisis," said Farmer.