Model Design For Sequential Decisions Based Upon Valuation Of Exploration Information By Capital Markets - Case Study, Roll-Type Uranium Deposits ? Introduction ? Perspective

The structure of an exploration model reflects a number of design considerations, one of which is the question or issue-to be investigated by the model. Thus, a model designed to evaluate the magnitude of risk and its economic implication to optimal decision making at each decision juncture of a multistage exploration architecture differs considerably from one designed to evaluate, say, the long run average cost of discovery, in which the architecture of exploration is suppressed and risk is simply an element of average cost. The perspective of the model examined in this paper is that exploration is investment in (purchase of) information and that the next stage of an exploration program is undertaken only when the expected value of information to be acquired in that stage exceeds its cost. The degree to which this perspective is honored influences considerably model design. Consider two design objectives: