Optimal Exploration for and Exploitation of Heterogeneous Mineral Deposits

We model exploration for and production from a multiple-deposit, nonrenewable resource. Exploration is viewed as a Bayesian process involving learning about undiscovered reserves, and is undertaken both to improve the quality of and to replenish known reserves. Known reserves are not physically defined, but depend on the realizations of discrete episodes of exploration elsewhere and on decisions at each instant about the margin between ore to be mined and low-grade material to be rejected. The appropriate measure of resource scarcity, the sustainable level of the contribution of the resource, and the treatment of depletion in the national accounts are considered