The FDI angle:

• US-based mineral exploration firm KoBold Metals says its use of artificial intelligence (AI) in its operations "transforms the unit economics of exploration".
• The firm is using AI in its activities in Zambia, where it has pledged to invest $150m in copper exploration.
• Why does it matter? Conventional exploration techniques have not, by and large, changed in decades. AI could help to quickly rule out non-viable leads, and minimise high testing costs.

KoBold Metals believes that it has found the Holy Grail in terms of mining exploration methods and that it can use artificial intelligence (AI) to catalyse investment in the industry. 

The California-based company, which was set up in 2018 and is backed by US billionaires including Bill Gates and Jeff Bezos, uses AI at the stage of determining which countries it should target, and then throughout the exploration process. 

“We are looking for the major outliers” in terms of risk and reward, says CEO Kurt House. “These are needles in haystacks.” 

The company, which has its largest project in Zambia, is looking at “dozens” of new jurisdictions, including in Africa and south-east Asia, Mr House says. The physical quality of the prospects, the legal position of jurisdictions and the available infrastructure are the main factors which will determine which ones are chosen, he adds. 

KoBold has a budget for research and development, surveys and drilling of about $100m for 2023. AI “transforms the unit economics of exploration”, says Mr House.  

The tools used by KoBold were co-developed with Stanford University. KoBold does not sell or licence the technology, preferring to take stakes in joint ventures with exploration partners. In 2021, the company agreed partnerships with BHP for a jointly-funded exploration project in Western Australia, and with BlueJay Mining for a critical minerals project in Greenland. 

Accessing usable data, whether from public or private sources, is an essential condition for making the model work. “You can’t systematically search the planet if you don’t have the data,” Mr House says. 

False hypotheses

Conglomerate Standard Industries in the US invests in industrial businesses in public and private markets. Its involvement with KoBold began when Mr House had coffee with Standard Industries co-CEO David Millstone on a pier in San Francisco in December 2021. 

The two discussed the philosophy of science and philosopher Karl Popper’s test of falsifiability. They agreed that traditional mining exploration practices had high testing costs, and often failed to quickly eliminate non-viable leads. 

Mr Millstone argues that the benefits of digital technological advances have not been successfully applied to the physical world. Digital technology assumes the ability to test at low cost, which does not exist in most industries. He sees this as a key advantage of AI that can be deployed in mining. “Excluding an idea [a non-viable deposit in the specific case of KoBold] is just as important as including it,” he says.

The meeting of minds was enough to prompt Standard Industries to invest in mining exploration for the first time in a KoBold fundraising round in February 2022. The company has raised $392m in three rounds.

Juniors at the sharp end

With some exceptions, according to Mr House, conventional exploration techniques have not changed in decades, and an efficient explorer from the 1970s would be perfectly at home today. There have however been changes at the level of corporate finance. Many mining majors are now content to let their smaller peers, known as juniors, undertake the risky work of exploration. Many juniors are poorly financed and often struggle to fund their own drilling campaigns, Mr House says. The company says that more than 99% of conventional exploration projects fail to become mines.

Juniors understand that they need to make use of AI. “We have to follow the AI route. It’s inevitable,” says Quinton Adams, an executive director at Copper360 in South Africa’s Northern Cape province. The company is considering how it can introduce AI into its processes. “It’s something we will definitely pursue,” he adds.

Oil and gas exploration is widely benefitting from AI, but mining has lagged behind, says Segun Lawson, CEO of west Africa-focused junior miner Thor Explorations. He now sees that changing as AI is “rapidly getting more integrated into exploration”. Thor is looking at ways to use AI. “We can’t ignore it. We need all the help we can get,” says Mr Lawson.

Meanwhile, in Zambia

In December 2022, KoBold agreed to invest $150m in copper exploration in Zambia. Business confidence has improved in the country since the election of president Hakainde Hichilema in August 2021. 

Previous increases in royalty payments and changes to tax rules under former president Edgar Lungu, who was accused by critics of ceding to resource nationalism, had led to divestments from companies such as Vedanta and Glencore. 

In 2021, Mr Hichilema reformed the tax framework, and Zambia was Africa’s most improved jurisdiction between 2022 and 2023 according to a measure of risk and reward by Oxford Economics and Control Risks. 

The country, where copper accounts for about 70% of export revenue, aims to increase annual copper production from 760,000 tonnes in 2022 to three million tonnes in 2030. In 2022, Canada’s First Quantum Minerals said it will invest an additional $1.25bn in the copper and gold Kansanshi mine, and Barrick Gold Corporation says it will increase production at the Lumwana copper mine due to the improved tax regime. 

Mr House describes Zambia as a “spectacularly good jurisdiction” and “an easy call”. The Mingomba mine in the country’s Copperbelt Province is KoBold’s largest and most advanced project. Mr House hopes that it will be possible to start production there by the end of the decade. 

In Zambia, he says, KoBold can use AI to predict copper grades within 100 metres of an established measurement to within a single percentage point of the actual grade. The uncertainty of AI forecasts increases “exponentially” over longer distances, says Mr House, but he argues that AI still adds value compared with traditional methods by quickly ruling out unpromising possibilities. 

He remains uncertain as to whether KoBold will seek to develop mines itself or focus on exploration. Previously the company did not intend to build mines itself, but the situation has changed due to the value of AI in pinpointing where to dig. There is still a possibility that KoBold will want to take on partners for mine development but “our current view is that we will take it the distance”. 

Mr House wants to see more AI-backed explorration if the world is to have any chance of discovering the volume of new mines needed in coming decades to provide minerals for a transition to electric vehicles. “KoBold can’t do it alone,” he says. “We need more competition.”

David Whitehouse is a freelance journalist in Paris and editor at large of The Africa Report.

This article first appeared in the October/November 2023 print edition of fDi Intelligence